The Right -- and Wrong -- Steps to Reform the Fund Industry

If this uproar makes you more mindful of how much you pay for a fund, then it's accomplished something. If it shames the fund industry into cutting its fees, even better.

Useless: Disclosure of Proxy Votes and More Frequent Release of Fund Holdings

Over the last year, the Securities and Exchange Commission has been busy trying to clean up corporate America and its own reputation following all those nasty, embarrassing business scandals. And the agency hasn't left the mutual fund industry untouched.

The SEC is making mutual funds reveal how they vote on shareholder proxies, covering issues like executive pay. It also plans to require funds to release their portfolio holdings every quarter rather than every six months.

In theory, maybe more information is better. But will this increased disclosure help you as a mutual fund investor?

Nope.

How a fund company votes on proxies shouldn't have any bearing on whether you buy that fund or not. You examine a fund's expenses, risk, track record, management and strategy before you buy it. Those are the things that are important. Knowing how a management team voted on Coca-Cola's(KO Quote) most recent proxy is not going to help you make better fund choices.

The same thinking applies to more frequent disclosure of a fund's entire portfolio. Seeing all the holdings in a fund only twice a year is perfectly sufficient.

Some people will say: But I want to know what the manager owns. Well, you can get a good sense of what the fund holds by looking at the top 10 list, which you can get more frequently. Plus, you don't invest in a mutual fund to second-guess the manager. The professional is the stock-picker, not you. And if the manager has bought into one too many disasters, you'll quickly see it in the fund's performance. You don't need to comb through a list of holdings to figure out if a fund stinks or not.