Customer Reviews

The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It

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In THE INVESTOR'S DILEMMA the writing is so clear and the case so well laid out and logically built that I feel I've had the most enlightening new look at investing...at how to participate in the growth of the world economy with but a few funds.

The book's concrete examples, naming names and showing specifics...rather than simply expounding theory...is compelling.

As a longtime (26 years) investor in Sequoia...my only fund for years, I was extremely interested to read about Fairholme and Wintergreen and am now a shareholder in those, too.

In the face of so many niche funds, sector funds and "style boxes", Prof. Lowenstein's pointing out that these three great managers are now free to invest all over the world in any size company they like is an extremely important point...one that can greatly simplify an investor's job.

THE INVESTOR'S DILEMMA is a beautifully written lesson.

Your financial planner and mutual fund advisor are not going to recommend that you read Louis Lowenstein's book, "The Investor's Dilemma", but if you want to be a knowledgeable investor, I highly recommend that you do. Fund boards of directors and management companies are exposed for their betrayal of investor interests. Management fees continue to grow, while the benefits of increased assets under management go into the pockets of the publicly-owned and privately-held management companies. And the dreaded 12b-1 fees continue to be assessed to the fund holders enabling the management companies to further enhance their take at the expense of the fund investors.

The final chapter, "How to Pick a Mutual Fund", provides excellent guidance on how to go about identifying funds worthy of your hard earned savings. My only disappointment was that Mr. Lowenstein only specifically recommends two funds, one of which I already own. With all his research, I would have thought he could have come up with more.

Finally, the reader is left with somewhat of a mystery by the author. By way of full disclosure it is stated that "the author owns relatively modest positions in both funds" recommended. He goes on to recommend that investors own no more than three (four, tops) stock funds. So, where does Mr. Lowenstein invest the rest of his money? Does he eat his own cooking?

I hated to see this book end. Perhaps there will be a sequel that will provide further guidance on selecting worthy funds and fund managers with more specific recommendations.

The mutual fund industry has depended, for success, on its ability to portray itself as complex - too complex for the many millions who invest to know or understand how it actually works. Lowenstein converts that complexity into a clear, understandable explanation, while defining the myriad conflicts of interest which short change those investors while creating incredible wealth for the managers. Amazingly, he also sets out easy to follow methods of choosing a fund which protects its investors and their money, even though there are not many.
The book is superbly researched well organized and written with great warmth.

Lowenstein's book is a much-needed antidote to the self-serving advice consistently provided by brokers and financial advisors -- and the newspaper and magazine reporters who parrot them. It sets out in such plain language, exactly how such advice serves their purposes but not their investing clients, that everyone can evaluate for themselves what to believe and why. A must-read for both experienced and unsophisticated investors.

I really enjoyed reading this book. The author uncovers the truth behind the mutual fund industry. The basic idea is that mutual funds change too much and deliver weak performance. The way these companies make money is by having as much assets under management as possible. Delivering investment performance is secondary.

Investing is completely different from the business of investing, and this book makes readers more knowledgeable about a small part of the investment business. If you own mutual funds, you absolutely must read this book.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

Active portfolio managers read at your own risk! T Rowe Price Funds shareholders read at your own risk! 401K participants in target date funds read at your own risk! "Financial advisors" read at your own risk! You are NOT going to like what Lowenstein has to say. And his critiques of the industry as a whole often hit the sweet spot (sore spot if you're one of the above). Lowenstein also appears to have an axe to grind against T Rowe Price funds in general and the Science Technology Fund in particular. Not clear if he got burned in Sci-Tech. But Lowenstein's view of what's good in the market and how to get there is limited to what his son has tried to pull off-- a "What would Warren do?" strategy with cherry picked Graham-Dodd adages for tactics. Lowenstein critizes the whole field of mutual funds, but targets only mega cap value funds as the universe to select from. Ignore bonds, ignore small caps, ignore growth companies, ignore international markets. Buy the big stuff Warren would buy, or buy managers who only buy big stuff they think Warren would buy. His critique on asset allocation, for example, is really directed to "sector rotation" equity managers, not at allocating amongst stocks, bonds, cash, et.al.. Bogle did the classic critque on fees years ago. So if you're a big value stock kind of investor without the resources to mimic Warren as Roger wants you to (and, just how many new Warrens has that created?!) then you can follow his dad, Louis, and look for big value manager type mutual funds. Otherwise, look elswhere. But use the industry critques to beat your broker over his/her head with their 3600+ fund offerings loaded with commission $ for their yachts, not your dinghy. and recommend this book to your HR department so they can browbeat your 401K provider too.

Once again Louis Lowenstein has done what others have neglected to do: unveiled the truth behind mutual fund fees, excessive trading, and at the same time points the reader to old fashioned, real value investing managers and how they stick to the tried and true. An excellent read!
PDC

Professor Lowenstein makes the complexities of the mutual fund "industry" accessible to even those of us who normally glaze over at the mere mention of finance. This lively and entertaining expose of the mutual funds we love to trust reveals that most are concerned with marketing "products" and increasing funds under management than with research and responsible investment one company at a time. He argues that highly compensated fund sponsors don't invest in their own funds, offer misleading statistics and avoid comparing their performance with the S @ P. He points to a few funds that follow the philosophy and strategy of "value" investing, eschewing market trends and focusing instead on strong well-run businesses. Lowenstein places his discussion in a brief and cogent history of the market. As a retired woman, concerned about my own investments, I found his book a page-turner.

I wish upon wish that this book had been around when I first dove into the mutual fund world. This book blows the cover off of an entire industry and tells the reader things that he/she will never hear from anyone in the business. During the course of my investing "career", I have seen things in annual reports that didn't make sense, but being the uninformed, trusting individual I was, I assumed things didn't make sense because I wasn't smart enough to make sense of them. Now I know. They didn't make sense because...they didn't make sense. Everyone and anyone who invests in mutuals should read this book.

As a financial professional, I would urgently advise individual investors who have entrusted their hard earned money to the mutual fund industry to read this book. I know all too well, as an insider who works for a large investment firm, of the conflicts of interest that exist between the house and the retail investor. You will do yourself a big favor by incorporating some of the basic guidlines in selecting mutual funds whose management team have also a vested interest in the funds they manage. There are few funds currently operating that adhere to such principles. The Goldgarb 10 is a good starting point as these managers have incorporated Graham and Dodd into their investing framework and process.