The End of Mutual Funds?
Stewart isn't the only one bashing Cramer. In the March/April 09 Yale Alumni magazine, Yale's brilliant chief investment officer David Swensen blasts not only Cramer but most of the fund industry too: "Look at Fidelity and Schwab with their full-page advertisements. Or Jim Cramer. The investor is bombarded with staggering amounts of information, staggering amounts of stimuli, that are designed to get the investor to buy and sell and trade, to do exactly the wrong thing, to create excessive profits for these intermediaries that aren't acting in the investor's best interests." This reminds me of Black Swan author Nassim Taleb, who said much the same thing when I interviewed him recently in Newsweek.
Swensen goes on to call the mutual fund industry a "marketing industry" rather than an investment management industry, and recommends that people invest on the basis of asset allocation -- figure out what percentage of your money you want in stocks, bonds, etc, then buy index funds or exchange traded funds that get you there cheaply. Seems like more than a few folks are already taking his advice -- the combined assets of American mutual funds have been falling for months, not only because of losses, but also because of large withdrawals.
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Rana Foroohar is the deputy editor in charge of international business and economics coverage for Newsweek. She conceives and edits a weekly section of breaking news stories, features and guest articles. She also writes economic cover stories and opinion pieces, and pens a bi-weekly column on the global economy.
Foroohar oversees Newsweek's team of global correspondents and stringers, directing their reporting on the week's business news. She edits regular columnists such as hedge fund manager Barton Biggs, Morgan Stanley emerging markets head Ruchir Sharma, Yale professor Jeffrey Garten and PIMCO CEO Mohamed El-Erian. She is in charge of economic coverage for Newsweek's annual Davos special issue, which features pieces by world leaders and economic thinkers, and also chairs panel discussions while at the World Economic Forum in Davos.
Prior to taking this New York based position in 2007, Foroohar spent six years as Newsweek's European Economic Correspondent based in London, covering Europe and the Middle East. During this time, she was awarded the German Marshall Fund's Peter R. Weitz Prize for transatlantic reporting. She has also worked as a general editor at Newsweek, a reporter for Forbes magazine, and as a writer and editor at various other national and international publications. Foroohar graduated in 1992 from Barnard College, Columbia University, with a B.A. in English literature. She is a life member of the Council on Foreign Relations.
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