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Prospering with Mutual Funds: How anyone can *Afford* an Investment Advisor

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  • Ulli G. Niemann
    Article Title: Prospering with Mutual Funds: How anyone can *Afford* an Investment Advisor Article Author: Ulli G. Niemann Article Copyright: 2004Article
    Message 1 of 1 , Apr 29 11:38 PM
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      Article Title: Prospering with Mutual Funds: How anyone can *Afford* an Investment Advisor
      Article Author: Ulli G. Niemann
      Article Copyright: 2004

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      Prospering with Mutual Funds: How anyone can *Afford* an Investment Advisor
      Copyright � 2004, Ulli G. Niemann

      Recently I was invited to appear on a live CNNfn television
      show to discuss my article �How to evaluate Load vs. No Load
      Mutual Funds.� (You can read that article on my website

      As the producer and I were working out the logistics of my
      appearance, she mentioned in passing that �most people can�t
      afford an investment advisor.�

      While that wasn�t the time or place for me to discuss this, I
      realized that many people might have a similar misconception.
      Had conditions allowed, I would have pointed out the following
      to her.

      There are only two ways an individual can invest in mutual
      funds: Selecting and investing themselves or using outside help.
      If they use outside help they�ll have a couple of choices again:
      A commissioned salesperson (broker, financial planner or
      Registered Representative) or a fee-based investment advisor.

      Most people don�t know the difference and often start with a
      broker who charges about 6% commission off the top to purchase
      a mutual fund. The fund is usually from a limited selection of
      fund families the broker has a relationship with. He, of course,
      would never recommend a no load fund or an exchange traded fund
      (ETF), since it is not in his best interest -- although it might
      be in yours.

      Having a fee-based investment professional handling your
      portfolio will get you as close as possible to receiving advice
      that is based on nothing but the advisor�s best knowledge and
      evaluation of the market. They advise only what they consider
      top performing funds since sales commission is not a
      consideration and does not create any conflict of interest for
      them. But, how can you "afford" an advisor?

      First off, the advisor's fee is usually in the range of 1% to 3%
      per year depending on portfolio size. This amount is billed in
      advance on a pro-rated quarterly basis and charged directly to
      your investment account. This creates an initial savings right
      off the bat.

      Most fee-based advisors offer complete service as far as your
      portfolio is concerned. That means that they don�t simply �sell�
      you a mutual fund and disappear until you call again. Since
      investors evaluate advisors based on the performance of their
      portfolio, advisors are keenly interested in maximizing your
      bottom line. In the long run, your gain should outweigh their

      Many advisors utilize an investment discipline or methodology
      that keeps you not only invested during upswings in the market,
      but also in the appropriate funds for the current economic
      environment. For example, at one time, tech funds were hot.
      Now, generally, they're not. An advisor watching market trends
      could have been able to assist you in avoiding the bursting
      bubble. (In fact, my clients were advised to pull out of the
      market and into the safety of money markets in October, 2000,
      just before the market plummeted. What they didn't lose because
      of this will more than cover my fees for the rest of their

      Most advisors don�t have lengthy agreements and you usually can
      cancel by giving 2 weeks notice. The advisor never has access to
      your money because he is affiliated with a custodian who handles
      the money, the monthly statements and fulfills the proper legal
      reporting requirements.

      With this arrangement an advisor can actually save you money.

      1. The advisor will use only no load funds. Because of his
      affiliation with a custodian (often a major brokerage firm),
      he�ll have access to some 10,000 mutual funds, not just to one
      or two fund families as most commissioned brokers do. This
      allows him to pick the best available, which potentially means
      a higher return for his clients.

      2. At times there are superior load funds available, especially
      in the international arena. I have used a couple of those in my
      own practice because they were available to me as �load waived
      funds� and my clients got the advantage without paying a sales

      3. Custodians many times also offer �Advisor only� funds. These
      are usually high performing mutual funds where the fund family
      wishes, for whatever reason, to deal only with investment
      professionals, so they set high minimum dollar requirements.

      Such was the case in my practice during our most recent buy
      signal (4/29/03). I purchased the NAMCX fund, which was only
      available to advisors through my custodian. This fund rewarded us
      with a cool 47% over the following five months. Most independent
      investors would not have had access to such a fund on their own.

      Keep in mind that markets fluctuate and starting with an advisor
      in the middle of a downturn will not likely yield high profits
      at first. However, over time, an advisor will most likely produce
      results better than what you would reasonably expect yourself to
      do, even with the advisor's modest fee.

      Choosing the right advisor and watching how your portfolio
      performs with their advice will almost always prove that it
      doesn't cost you to have an investment advisor, it pays.

      � Ulli G. Niemann

      Resource Box:
      Ulli Niemann is an investment advisor and has been writing about
      objective, methodical approaches to investing for over 10 years.
      He eluded the bear market of 2000 and has helped countless people
      make better investment decisions. To find out more about his
      approach and his FREE Newsletter, please visit:

      Posted: Fri Apr 30 02:38:44 EDT 2004

      For more articles by this author, please visit:

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