Get the latest investment articles in your inbox.

Check out this real-life story of how mutual fund pitfalls, especially taxes on capital gains distributions, nearly wiped out a couple’s retirement savings.

mutual fund pitfalls

In 2005, George, a 62-year-old sole practitioner lawyer, and Janice, a 60-year-old non-profit administrator, were earning single-digit returns on the $100,000 they had in the bank. Then Janice’s investment advisor brother Tom persuaded them to shift their money to the stock market.

George wired the entire $100,000 to Tom, who placed $5,000 in each of 20 mutual funds to minimize risk through diversification. Of course, many of the mutual funds were invested in the same companies! George and Janice were not nearly as diversified as they first thought.

By November 2008, their $100,000 investment had dwindled to $46,000.

Tom told George not to worry. “The Federal Reserve and the new President will save the economy,” he said. “Stick to the stock market!”

But the market did not improve. And Tom’s “diversification” efforts were destined to fail. George and Janice ended up with about 20 mutual funds worth on average about $2,300 scattered across companies such as Merrill Lynch, Fidelity, T. Rowe Price, and Putnam.

To add insult to injury – the couple owed $11,000 in taxes on capital gains earned before they even owned the funds!  

When George and Janice found me in 2010, we immediately liquidated their mutual funds to avoid further capital gains taxes. Then we invested their balance into the ValueAligned® Portfolio via a separately managed account at Folio Institutional.

Using the principles of ValueAligned® Partners, George and Janice have gained control over their retirement again.

Traditional mutual funds keep shareholders in the dark through hidden fees and a lack of overall transparency.

By letting investors control their assets, I’m preventing more couples like George and Janice from being hoodwinked by mutual fund companies and the financial advisors who recommend them.

Mutual fund pitfalls threaten innocent couples every day. Don’t let yourself – or others around you – fall victim.

Read my new white paper “Stop Wasting Your Money in Mutual Funds” to learn more, or give me a call today at 732-800-2375.

Image Credit: nitpix l morguefile