Blue Bottles, Bike Ride (& T Rowe Price)? This weekend I got out on my bike for a 20 mile ride along the ocean. Incredible day, incredible ride, and yes, I was sore because I don't ride as often as I should. Note to self - get on the bike more often! I give all readers the right to give me grief about not riding often enough! Please! Let's go riding together!
Each time I reached down for drink of water as I huffed/puffed, it reminded me that earlier in the year I attended a TD Ameritrade Institutional Conference in San Diego. I stopped by the T Rowe Price booth because they were giving away bottles that looked like they would fit my bike perfectly and they do! I love them. I have a blue bike - it works and they were free. Or were they? Nope, someone is paying for them. Who?
Ironically, the blue bottles, marketing gimmicks, are from the same fund company that spends millions on advertising - that is misleading. First a little background on retail mutual funds.
Actively managed retail funds are generally sold not by investment advisor fiduciaries like us but by financial product salespersons. The fund fees are higher. They have to support marketing budgets (blue bottles, advertising, slogans and clever fund names) and pay commissions to the salespersons through the 12b-1 fees. The salespersons (typically) are not licensed to give investment advice.
Often retail mutual funds have cool names, "new opportunities fund"! Makes you want to invest, doesn't it? We should have a contest sometime for most ridiculous marketing-driven fund name.
Have you heard the T Rowe Price marketing "puffery"? They say something like "80% of our funds beat their corresponding Lipper average". Sounds good until you find out that the Lipper average is a lower benchmark than the corresponding index. Lipper is an average of T Rowe Price's peers - actively managed retail funds. 80% of actively managed retail funds cannot beat the corresponding low cost index/passive fund (that we use). By using the lower Lipper benchmark they can make a more impressive marketing statement. Those Lipper averages come in convenient don't they? No wonder fund companies pay to get into the Lipper service.
So who is paying for my blue bottles? One source is a local company 401(k) plan which switched their plan to T Rowe Price in the last year and the plan sponsor is "very pleased". She also now knows that she and her plan participants helped pay for my very cool, lightweight, blue bottles that say T Rowe Price on the side. I really do love those bottles.
The moral of the story: "There's no such thing as a free blue bottle." (or ride your bike more often and don't buy retail mutual funds) :)
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What to Do Next
We regularly analyze folk's current investment strategy with nothing expected in return. We look at: - Overall Performance (vs. benchmark NOT Lipper average!)
- Portfolio Design
- Diversification
- Fees & Expenses
Since so many brokers use an active management strategy, the comparison to our model portfolios (passive) is usually eye-opening. An active strategy is fraught with difficult challenges like where to purchase a reliable crystal ball. (Maybe ask Harry Potter, never mind he's fictional.) Give us a call. You are your own fiduciary - and getting an objective review of how your precious assets are being invested is a wise move to protect yourself & your loved ones. We tell you how you're doing things right and wrong. 760-804-0910 and when you call, remind me to ride my bike more often or invite me to ride with you sometime. :) |
