Eye on the Media: The Village Voice Takes on Mutual Funds

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Publish date:

By Alex Berenson
Staff Reporter

You stick to cultural criticism. We'll stick to mutual funds.

Given the ever-expanding number of fund investors and size of the industry, it was probably inevitable that even

The Village Voice

would eventually notice the fund business. And guess what: True to its lefty heritage, the

Voice

, an alternative weekly newspaper based in New York, has a beef with funds. "Not Mutual-ly Beneficial," complains a

story

in the July 3 edition of the

Voice

.

Yet, given the

Voice's

history, the piece will disappoint readers hoping for a classic socialist rant against the notion of stock ownership. Instead of a full-bodied attack on the unfair distribution of wealth between capital and labor, author James Ridgeway takes a swipe at the fees in the fund business. The

Voice

, the once-proud home of

Norman Mailer

and

Jack Newfield

, reduced to offering

Money

magazine-esque personal finance advice? Oww.

Worse, Ridgeway's complaints are somewhere between half-baked and just plain wrong.

"Mutual funds are not a way to get rich. For most investors they produce modest earnings," he gripes. Well, in the short run, Ridgeway's right. (That's not just true for funds. In general, trying to get rich in the financial markets in a month or a year is as much a sucker's bet as throwing money at the lottery.) But compound those modest returns long enough, and you'll be more than OK. A 10% return for 25 years turns $1,000 into $11,000. At 12% for 30 years, $1,000 becomes $30,000.

After venting that funds haven't turned us all into overnight millionaires, Ridgeway goes on to gripe about the industry's fees: "On average, the fees add up to 1.3 percent of the value of an account, but they can run as much as 3 percent." And how can the industry get away with these outrageous charges? "Most people probably don't even know the fees exist," Ridgeway postulates.

Most people don't know? Perhaps five or 10 years ago personal finance was an arena in which only the anal would tread. But now, you can't turn on

Good Morning America

without getting hit over the head with money tips. Mutual fund fees are just the kind of grist that keeps the consumer watchdog press in business.

Anyway, does the

Voice

really think that professional investment advice is an entitlement?

Ridgeway quotes

Vanguard

founder John Bogle: "We are spending all this money on management and getting funds that don't beat the market." And you know what? Bogle's right.

But there's a very easy solution for people fed up with that problem: Buy one of Bogle's index funds. They're really cheap, and you'll never have to worry if you're beating the market or not. Or, if you don't want an index fund, just look for a fund with lower fees. They're disclosed in black-and-white all over the prospectus.

Nowhere does Ridgeway give investors that simple piece of advice.