Monday, September 19, 2005

Investing - Watch Out for the Marketing

In Canada, we are in the "off-season" for advertisements from investment companies selling us their investment options. However, no matter when the advertisements are on, investors need to be very careful not to get swayed by the aggressive advertising tactics of these companies. I came across a list of things that investors should keep in mind when viewing advertisements about investments. Here is the list:
  1. If a fund compares itself to a benchmark, this is a good sign [if it does not…]
  2. If a fund ad includes a risk measure or indicator, this is a very good sign [too rare of course]
  3. Try to find out why the fund had such great performance - a spate of hot IPO'’s, a spike in the price of oil or really astute portfolio management
  4. Chuckle at the images but focus on the numbers
  5. Don'’t be swayed by stars. In 1996, Fidelity, desperate to get a Canadian equity fund with decent performance, had wooed high profile manager Veronika Hirsh from rival AGF. She got a brand-new fund, Fidelity True North, and the defection caused a blaze of publicity because AGF had built a massive TV advertising campaign around her. But Ms. Hirsch soon parted company with Fidelity when it emerged that, while at AGF, she had invested in a junior gold stock and then bought it for her fund. She paid $140,000 to regulators to settle the case and now runs her own fund company, Hirsch Asset Management.
  6. Check the dates-fund firms sometimes, inadvertently, use stale data. Base your returns on the most recent information available on several reliable web-sites such as and
  7. Double check the fund'’s portfolio holdings; mutual fund names are notoriously misleading
  8. Don'’t be swayed by images of Spiderman or any super hero. They don'’t really exist and anyways who knows if they really own mutual funds
  9. Get a magnifying glass for any text in small font
  10. Be also alert to the business media
The entire article can be found by going to this page, and entering "Analyze fund ads for clues" in the search box.

P.S. I know I said the next article was going to be about asset allocation - I liked this topic though and decided to quickly post it. Stay tuned for my thoughts on asset allocation....


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