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The Great Mutual Fund Trap: An Investment Recovery Plan Hardcover – September 24, 2002


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Product Details

  • Hardcover: 335 pages
  • Publisher: Broadway Books; 1st edition (September 24, 2002)
  • Language: English
  • ISBN-10: 0767910710
  • ISBN-13: 978-0767910712
  • Product Dimensions: 9.5 x 6.5 x 1.1 inches
  • Shipping Weight: 1.3 pounds
  • Average Customer Review: 4.3 out of 5 stars  See all reviews (24 customer reviews)
  • Amazon Best Sellers Rank: #1,237,751 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

If you've been burned on Wall Street (and who hasn't?) but still need a practical place to park your savings (who doesn't?), Gregory Baer and Gary Gensler have your number. While somewhat mistitled because it decries "active investing" in individual stocks as well as in mutual funds, The Great Mutual Fund Trap is nonetheless a clearly and even entertainingly written argument in favor of the alternative: investing broadly in stocks that mirror the performance of the overall market. During their years in private investment and with the U.S. Treasury and Federal Reserve, Baer and Gensler have come to believe the high fees and high risks that go with always trying to beat the market make "active investing"--be it constantly fiddling with your own portfolio or relying on professionals to do so for you--a no-win proposition. Instead, they say, you can actually improve returns by shifting to "passive investments" that offer lower costs and greater tax efficiency. After explaining why they feel as they do, the authors thoroughly describe the appropriate vehicles--index mutual funds, exchange-traded index funds, and several other products--in a way that makes these staid options seem almost exciting and gives interested readers all the tools they need to utilize them. --Howard Rothman

From Publishers Weekly

Gregory Baer is the former Assistant Secretary of the Treasury for Financial Institutions, and Gary Gensler was once Under Secretary of the Treasury responsible for policies in the areas of U.S. financial markets, debt management and financial services. The two have teamed up to write The Great Mutual Fund Trap: An Investment Recovery Plan. Their book is meant for Americans who invest in the stock or bond market as a means to achieve long-term goals-such as paying their children's college tuition or securing their own retirement-but who, say Baer and Gensler, are paying unnecessary fees and running needless risks. Wishing to alert consumers to the traps that await them in financial markets, the authors offer alternatives and new opportunities for investors to improve returns and diminish risks, such as moving from "active" to "passive" investment, investing in international stocks, distrusting "hot funds" and investing in index funds. Conversational and easy to read, Baer and Gensler present realistic advice that will be useful to everyday investors.
Copyright 2002 Reed Business Information, Inc.

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Customer Reviews

It's a very well written book.
Vahania63
He absolutely methodically unrelentingly will shake up your belief in money managers and mutual funds and the big investment firms .
rbrazz
I recommend reading this book and following it's advice.
Alice of Wonderland

Most Helpful Customer Reviews

10 of 10 people found the following review helpful By A Customer on October 26, 2002
Format: Hardcover
I was really concerned about the huge losses I have seen in my kids' college funds and my retirement funds. I have everything in stock -- I figured I am young enough to wait things out. I also think I know a good stock when I see one. Boy, did I learn alot from this book, and I am SO glad I bought it. It is easy to read and understand, and is quite funny too. I knew I needed to spread my eggs into more baskets, but this book showed me where I should move my money, that picking individual stocks is very risky, and how to avoid huge investment fees. The examples (such as why fund managers are like bookies) really help you visualize how much money you are throwing away, and are quite amusing!
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9 of 9 people found the following review helpful By A Customer on February 17, 2003
Format: Hardcover
Even if you disagree with the premise, there are three chapters that are worth the cost of the book:
2. Lead Us Not Into Temptation "The message of "trust the experts / trade frequently / beat the market" saturates the airwaves and fills the newsstands."
6. The Ankle Weights on Running an Actively Managed Fund "...all these costs stand between you and the market-beating performance you crave."
13. Why We Draw to Inside Straights and Invest Poorly. "Human psychology plays a big part in explaining why."
I not sure about ETFs. And the book is wordy in sections. But those three chapters are worth the book.
"Finance, n. The art or science of managing revenues and resources for the best advantage of the manager." -Ambrose Bierce
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8 of 8 people found the following review helpful By A Customer on October 13, 2002
Format: Hardcover
I am a single mother of three who is watching my children's college funds plummet.
I was in shock when I read this book and realized how much money I have lost because the fund manager has churned my stocks and cost me alot of money (especially in my situation) in taxes and fees. I am an artist who has little understanding of where to invest, but this book is written in a way that I understand. I realize one of my biggest mistakes was putting too much money into the stock market. With this book I think I can salvage what I have left and invest my money better for my kids' college educations.
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16 of 19 people found the following review helpful By Donald E. Fulton on December 15, 2002
Format: Hardcover
As an experienced investor and already a true believer in indexing and low cost investing, and having read books by Bernstein, Boogle, and others, I expected to learn little from this book. Wrong! This book by two of Rubin's boys (Clinton Treasury UnderSecretaries) is the best treatment I have ever seen about how the financal industry bleeds the average investor. Pithy and witty with lots of new insights and information, this is an excellent book.
The book is worth buying just for the chapter on the huge costs that would be incurred by a privatized Social Security.
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7 of 7 people found the following review helpful By "charlesrossotti" on May 25, 2003
Format: Hardcover
The Great Mutual Fund Trap explains how you avoid wasting remarkable amounts of time and money in a futile search for the mutual fund or money manger that is going to beat the market. It does the job in clear English but without oversimplifying. The chapters explaining efficient markets and capital asset pricing models are especially good at showing the relevance of these arcane theories to the average investor.
This book should also be recommended reading for anyone who serves on the board of a non-profit institution with an endowment.
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9 of 10 people found the following review helpful By A Customer on January 20, 2003
Format: Hardcover
Even the Managing Director of Morningstar thinks this is a must read book. The "Trap" illuminated how much of my returns have been lost in fees and taxes AND how this really adds up over time. It also explains why it is pointless to try to beat the market through churning a portfolio. Further it shows that the lists of the best performing mutual funds are grossly distorted and a poor way to go about picking the best funds. I learned a great deal about investing from this book and highly recommend it!
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7 of 8 people found the following review helpful By Mark D. Wolfinger on May 15, 2003
Format: Hardcover
This book is truly required reading for anyone who owns or is considering owning mutual funds. Baer & Gensler show the reader why investing in traditional mutual funds is a losing proposition. The professional money managers who run these funds are NOT able to beat the returns available from index funds. Not only that, but they charge management fees for their inability to perform better than index funds. Couple that with the huge amount of trading fees generated by the fund managers, and one wonders how they can stay in business. The obvious answer is that too few pay attention to these details.
This book warns you about wasting your money by investing in these funds. The recommended alternative is not to attempt to beat the market. Instead, save money, reduce your expenses, and manage your money yourself. Buy index funds - or even better yet, buy broad based exchange traded funds (ETFs). Doing so achieves an investment return very close to that of the overall market - and you are much better off by the amount of those exorbitant fees you save.
I would go these authors one better by suggsting that buying ETFs can be combined with a covered call writing strategy that provides protection against loss and an increased opportunity for profit. (See: THE SHORT BOOK ON OPTIONS)
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7 of 8 people found the following review helpful By Vahania63 on April 12, 2004
Format: Paperback
It's a very well written book. The main purpose of this book is to show that mutual funds industry overall does not provide a good choices for regular individual investors and the book covers this topics exceptionally. It really reveals the real intentions of the industry and shows that this is the only way this indstry can work. The book advocates passive investment and especially index funds and exchange traded funds (ETF). While there were already quite a few good, if controversial, books about efficient market theory ('You can't beat the market'), such as famous 'Random walk On Wall Street', this book brings more details about today market environment and explains what choices passive investor has. My only complain is that sometimes I feel some kind of zealotry in authors considerations. Even for somebody that believes in efficient market theory some of the statements in this books could seem very questionable. Stock mutual funds takes majority of books space but the moment authors venture to the other territory (and they do try to cover practically all kinds of investments) their arguments often seem too absolute. Still, this is the book every investor in mutual funds must read (and it will probably convince you to make some changes in your investment strategy - it did this for me)
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