In this issue

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review

The curse of success, and why most mutual funds fail miserably

By Morgan Housel

JewishWorldReview.com | We spend a lot of time harping on mutual funds. Frankly, they deserve it. Most underperform their benchmarks and charge fees multiple times higher than passive index funds. The result is a giant wealth transfer from investors to fund managers.

But after speaking with a fund manager recently, I realize this story is more complicated than I've made it out to be. Mutual fund investors may have only themselves to blame for awful returns.

Most dismal mutual-fund returns are the result of managers engaging in the classic "buy high, sell low" dance. But those buy-and-sell decisions don't necessarily reflect the will of the investment manager. Fund investors are constantly adding to and withdrawing from the funds they invest in -- almost always at the worst time possible.

"You would be surprised how easy it is for a fund's investors to take control of the fund," the manager told me.

Imagine you're a smart fund manager who thinks stocks are overvalued. You don't have any good ideas to invest in. But you come into the office one morning and your secretary says, "Congratulations, your investors just sent you another $1 billion." What do you do? You can:

  • Keep it in cash or bonds.

  • Close down your fund and refuse new investments.

  • Grit your teeth and buy overvalued stocks.

The first choice isn't even an option for some funds, as their charters mandate that they stay almost fully invested. Even if they can, bulking up cash dilutes the investments of existing investors. Fund managers rarely take this option -- equity mutual fund cash levels have fluctuated in a tight band of between 4-6 percent over the last decade.

The second option is the noble choice, but rarely occurs, because funds earn fees on assets under management. When a fund manager goes to his or her boss and says, "I'd like to turn down $10 million in annual fees," the results are entirely predictable. Greenwich real estate doesn't buy itself, you know.

Option three is usually what happens.


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As Maggie Mahar writes in her book "Bull!":

"Everyone realized that as a fund manager, you were basically just a purchasing agent. As a purchasing agent, it was your job to put the money that showed up in whatever stocks your fund was supposed to invest in -- large-cap growth or technology or whatever. If you're a purchasing agent, price is not the issue ... you're like the produce manager in the supermarket -- you have got to have lettuce on sale the next day. No matter what the price. Maybe you can decide to buy the curly lettuce instead of the romaine. But the equity fund manager has to have stocks. You have limited control over what you're doing."

Now imagine it's 2009, and everything is going to hell in a handbasket. Stocks are the cheapest you've seen in your career, and the last thing you want to do is sell them. But you come into the office one morning and your secretary says, "Your investors want to withdraw $5 billion."

You have only one option to meet that demand: sell cheap stocks. Forget about all the buying opportunities -- your traders are working overtime to liquidate the portfolio, whether you like it or not.

Sadly, that affects all of a fund's investors. Even if one fund investor has a long-term outlook and no intention of selling, the fund's buy-and-sell actions can be dictated by maniac deposits and panic withdrawals. Other investors' decisions can hurt you. That's why they call it a mutual fund.

For talented fund managers, this cycle is accentuated by "the curse of success." Once the media labels you a "star," investors are going to break down your doors and throw more money at you than you know what to do with. Then, once you have a bad year, they're going to rip it away as fast as it came in.

Take Bill Miller of Legg Mason. Miller was one the best investors in the 1990s and early 2000s before suffering huge losses during the financial crisis that sullied his long-term track record.

What happened? In part, he made some bad calls. But Miller's early success and media fame led investors to give him a net $4.4 billion in new cash to invest just as stocks were getting expensive last decade. As his skill came into question, they then yanked nearly $10 billion out just as stocks were the cheapest they had been in years. Miller's wisdom didn't really matter last decade. His investors were calling the shots.

Think of it this way, and Warren Buffett's success is likely due in part to Berkshire Hathaway's business model. As a public company, rather than a mutual fund, investors can sell Berkshire shares, but they can't take capital away from Buffet's hands. He's in control.

So, what do we learn from this?

One, be wary of celebrity fund managers. They aren't adored today like they were in the 1990s, but every few years, about half a dozen fund managers grace the covers of the big finance magazines, get praised as geniuses on CNBC and have buckets of money thrown at them. The results are almost always the same: eventual disappointment. The correlation between fame and regret in the mutual fund world is highly negative.

Two, this is a good reminder of how important it is to learn to invest on your own. Whether that's passively through index funds or actively by buying a portfolio of high-quality stocks, your money is ultimately your responsibility. Unless you want to leave the outcome in a stranger's hand, you need to learn the ropes and take control.

(Morgan Housel owns shares of Berkshire. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway.)

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Morgan Housel, a columnist at The Motley Fool, is a two-time winner, Best in Business award, Society of American Business Editors and Writers and Best in Business 2012, Columbia Journalism Review.


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