Article by James Gray

There are many types of insurance for your home and car and selecting the right type can be difficult. A fairly new product line now being offered is green insurance, which takes into account sustainable features in a home to offer a discount for insurance or provides coverage for rebuilding green in the case of a claim. Here are eight important factors that make green insurance a great option for you:

1. It’s cheaper! You can get a discount of 5-10% not just on home insurance, but on car insurance as well. That ,500 a year for your teenage son just got a little less painful. And you don’t even need to drive a hybrid to get these discounts – just owning a green home is enough for some insurance companies to offer a discount on home AND car insurance.

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Green mutual funds are quickly becoming more and more popular. Since a large sector of the population is more interested in green products and services than ever before, this only makes sense. What’s even better is that a massive percent of this population slice are upper class, highly educated citizens with substantial incomes. Living green is not just about saving the Earth anymore, it is about making money.

When you get ready to invest in green mutual funds there are certain things that you ought to take into consideration. Clearly you will want to look into all the same things you would before embarking on any mutual fund investment. If you have never made this sort of investment previously you need to do research to help clarify exactly what you want and what you are looking for.

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Just as fund companies tend to overstate the expertise level of their youthful, call-center “investment advisers”, management also tends to attribute what the evidence shows to be more-or-less luck to extraordinary investment acumen. As I’ve said before, the exorbitant fees charged for active management would be well worth it, if superior returns were consistently delivered. But, the returns are not being delivered, and the fees are mostly not worth it (especially the overpriced, advisor-pushed funds). What’s worse, while I concede that in any given year, two thirds of fund managers will beat the market, that percentage decreases dramatically as the time horizon lengthens.

In fact, using a manager’s good track record has been shown to be one of the worst things you can do when picking a fund. The maxim of past performance as no guarantee of future results is right. For that matter, superior past performance is almost a guarantee of sub-par results in the future.

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Until 1971 dollar was tied to gold content, so the US currency was supported with gold reserves of the USA. However since 1971 dollar and gold correlation was canceled and dollars were produced in unlimited amount. Dollar purchasing power was ensured not only with the USA GDP (as it usually happens) but also with the GDP of other countries in the world.

It is ok, but the states which indirectly supported the power of dollar with their economies never had control on volume of dollar emission. The USA government doesn’t have such control either. The right of control has only the Fed of the USA.

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#10 – Soft Dollar Expenses

The reason a mutual fund exists is so small investors can pool their money, hire professional management, and attain diversity that would be nearly impossible for the small investor by himself or herself. It would stand to reason then that funds with hundreds of millions, or even billions, would have economies of scale to demand from the street the most competitive rates for trading their shares. Yet, as you will see, not only are fund firms NOT getting the most competitive rates, they are paying well more than any individual can get through their discount broker.

What are Soft Dollar Expenses?

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For most of the history of the Mutual Fund Industry average annual turnover hovered around 15 to 20 percent. This means that 15-20 percent of the funds portfolio changed each year. Put another way, the average holding period for a stock in a mutual fund portfolio was 8 years. Starting in the late 1970′s and accelerating in the mid-1990′s, average annual turnover is now 100 percent. Put another way, the average holding period is now less than one year. So, while preaching that a steady, long term approach was appropriate for their customers, the industry has itself moved from a stock-ownership mentality to stock-rental mentality.

I am going to save for another day the discussion about how this makes it more difficult to achieve results commensurate with the enormous fees levied. Be aware that this is aspect is the biggest problem with a short-term mentality. However, there are quantifiable reasons to avoid high turnover.

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If most people can not easily explain how they are getting charged for services, you can almost always bank on a rip-off in your midst. Such is the case with many mutual funds and their “fund classes”. Just like when a corporation offers up shenanigans like “super-voting” shares, grab your wallet.

Get this. The same organization with the same portfolio and same manager can have “A” class, “B” class, and “C” class shares. In some extreme cases they can also have “D”, “E”, “Z”, and more, but these are rare and we will not go into them here.

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The fudging of expertise is appalling in our business. Believe me, I know. I am 35 years old now, and have been in the financial services business 13 years now. When I was 22, fresh out of the University of Texas with a History degree, my first job was with Fidelity Investments as a mutual fund adviser. I passed the Series 6 exam in a matter of days. After a few weeks of training, most of which was listening to one of the more tenured reps (by “tenured”, I mean someone with six months experience), I was on the phone taking calls from all over the country, advising people on how to take care of their financial future. If you had called an 800 number on a prospectus or an advertisement, you would have been speaking with someone like me. Dozens of reps like me fielded calls, and not one of them had more than three years experience. I, myself, only lasted a year and a half in that job. Call center work has a way of burning you out.

In the 1990′s, Fidelity was undergoing rapid growth, and they could not keep the place staffed. They had planned on staffing to a level where no more than five customers were holding at any given time. Shortly after I arrived, we were constantly on “red alert”, which meant that 30 people or more were holding all the time. So, they relaxed their hiring requirements. They had previously insisted on a college degree for their newly hired reps. Soon, I was sitting next to pimply-faced 18-year-olds who had been in a high school classroom only a few months prior. Looking back on it, who was I to feel so superior? It’s not like I learned how to plan someone’s financial future in my “Western Culture, 1865-present” seminar at UT.

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An entire book could be written about the happy conspiracy between corporate managers and the investment community that pads both pockets at the expense of the everyday shareholder. In fact, one has been written. You should check out “The Battle for the Soul of American Capitalism” by John Bogle, the founder of the Vanguard Group. Bogle has been one of the few mutual fund industry luminaries that publicly decry the abuse taking place. It is an easy read. Check it out. Many of my top ten reasons are touched on in this book.

Over fifty percent of corporate America is owned by the top 100 financial fiduciaries. One would think that this alone would make them the most vigilant voices in the boardroom. In fact, few mutual funds demand accountability from management, and in many of the most egregious cases, they are guilty of downright aiding and abetting the fudging of numbers and the looting of otherwise good corporations. Why? Two glaring conflicts of interest prevent the industry from becoming the activists that they should become.

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The 12b-1 fee is the obscurely-named outrage that dings investors in mutual funds so that management can market the fund. In 1980, the mutual fund industry successfully lobbied the SEC to allow this fee with the justification that a larger fund lowers the expenses for everybody. In theory, the logic is right when you take into account the same expenses being spread over a larger pool of assets. However, there are several problems with this thinking:

1) A larger fund does not necessarily become easier to manage. Over the last 25 years, multi-billion dollar mutual funds have become the norm. When I worked for Fidelity in the early 1990′s, the largest fund in the world at the time, the famous Fidelity Magellan, was around $25 billion. Even then, concerns had set in that it had become too large to outperform the market. Since then, Magellan’s size has been a deterrent. Like a large barge, meaningful changes in its trajectory take too long to implement. Of the funds with in excess of $5 billion, most of them track the S&P 500 minus their outsize fees because that is all they can do. Yet, even these large funds continue to charge the 12b-1 fee.

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