Ignorance Is Sometimes Bliss.

Would Owning A Mutual Fund Be
A Better Approach?
“Ignorance Is Sometimes Bliss.”
A Closer Look at Heebner’s
CGMFX Fund
Source: Morningstar Analytics, 1/31/14
Source: Morningstar Analytics, 1/31/14
Source: GuruFocus.com
Source: GuruFocus.com
Source: GuruFocus.com
Source: Morningstar Analytics, 1/31/14
The Hidden Costs of Mutual Funds
• Portfolio managers can rack up steep expenses buying and selling
securities, but that burden isn't reflected in a fund's standard
expense ratio.
• Estimates show trading costs for stock funds totaling 2% to 3% of
assets annually, though conservative estimates place them closer
to 1%.
• There are other costs, not reported in the expense ratio, related
to the buying and selling of securities in the portfolio, and those
expenses can make a fund two or three times as costly as
advertised.
• Four main components: brokerage commissions, bid-ask spreads,
opportunity costs and market-impact costs.”
Anna Prior (March, 2010). The Wall Street Journal
Example: CGM Focus (CGMFX)
Investment: $10,000
Last Year's Itemized Costs of Owning This Fund
Your share of the fund's transaction costs
$446
4.46%
Amount you paid for fund management
$131
1.31%
Amount you paid for fund distribution
$0
0.00%
Taxes you paid for holding the fund
$0
0.00%
$577
5.77%
One-Year Total Cost of Ownership
Source: PersonalFund, February 2014
How About Another Top Performing
Mutual Fund?
Source: Morningstar Analytics, 1/31/14
Source: Morningstar Analytics, 1/31/14
Source: GuruFocus.com
Source: GuruFocus.com
Source: GuruFocus.com
Source: Morningstar Analytics, 1/31/14
Meridian Growth Fund (MERDX)
Investment: $10,000
Last Year's Itemized Costs of Owning This Fund
Your share of the fund's transaction costs
$94
0.94%
Amount you paid for fund management
$99
0.99%
$0
0.00%
$193
1.93%
Amount you paid for fund distribution
Taxes you paid for holding the fund
Source: PersonalFund, February 2014
When we own a Mutual Fund We
Can’t See What Is Actually
Happening “Under The Hood.” We
Only See The End Result.
What’s more important,
Chasing the Returns or
Chasing the Process?
STEP 1
STEP 2
STEP 3
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