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Dagen McDowell joins Elizabeth MacDonald to talk about the growing backlash against mutual fund “fees” in the wake of market losses this week.
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-- -- -- the stock market's wounds mutual fund managers to not take a hit.
They keep our -- in the fees -- they're supposed to manage your money.
So shouldn't they be able to shelter you from huge losses in your -- K and other investments and this kind of climate.
And if not you know why in a high fees anyway to them -- not doing anything Fox Business sector -- McDowell joins us -- Digging aren't let me just set the scene here hijacked boat alright Jack -- eight trillion -- eight or nine trillion dollar C trillion I actually don't speak -- that a for McCain and the stock accounts and only.
One point five Chilean vaporized in the last eleven days of trading -- -- Right so what we're seeing is Jack Bogle you know wait and listen to them he's -- vanguard mutual fund pioneer let me -- this quote.
He's so what are we paying at the mutual fund industry I have to trillion dollars and 08 what we payment for.
What the -- -- He said if they looked after other people's money.
With -- same period it looked after their own wouldn't be bailing out the banks what do you make about.
Your hand for people to go out -- pick stocks for you you're very often paying very high fees.
For very little value and you're talking about people who -- able to zig -- and pick stocks.
There will at least outperform the -- time and again throughout history.
Stock -- -- few good ones but.
But for the most part you wind up paying a lot of money right they're not able to even beat their benchmark what it what it mutual fund guys were supposed to be managing money they're being paid money what are they doing -- -- just sit there just watching that stock charts are not doing anything that's a way unfortunately mutual.
Funds have been designed particularly in in the last couple of decades is that you are fully invested all the time.
You don't run heavy amounts cat and that's not always the case like even in a bond fund like -- -- -- the price return bond fund.
He makes big picture calls on certain parts of the bond market.
So in some instances they are able to move the money around somewhat but very often it's like I'm a pick some stocks in Iran 100% stocks very little cash.
Yes good to do it so they don't they don't -- -- 10% of the underlying this is the annoying buy and hold crowd that's too much.
And you know and dominance or were rather dominates that mutual fund industries -- you're -- you're an expert.
-- watching people seeing their 401 -- getting torched and it's happening again.
And people don't like it they don't want to have to worry about their standard of living in retirement.
They want if it they don't wanna feel like you have to be rich to retire we'll also what you're -- at half -- trillion and these.
What again what for -- -- alternative would be index funds which for the most part Jack but was He -- the creator of them but certainly a pioneer and indexing.
But and -- that's just you're buying like the S&P 500 index relying on auto pilot that you just it's your pay very very low fees when you're buying the market -- -- deal with -- you do it around the world and then exchange traded funds and -- -- the same thing that you can just trade them like stocks.
Buy and sell them during the trading day.
It's great if you are behind -- if you can make it allocation and you reallocate.
You can make calls on where you think different parts of the -- going but very often what you see is people act on panic.
And they -- in nature are I can't and then appetite more fee there I wake up on a Thursday morning and in the markets down 300 rights and then they go.
Fully to cat figure out what assets under do you think Washington should have held more hearings on the mutual fund industry having you know it took a lot of money and for doing nothing.
There you know what if you wanna talk about fees the most egregious fees have a look at hedge fund industry.
And L and by the way but the mutual fund business and activity DC reaction the mutual fund business is.
Arguably the most have the regular have been heavily regulate but we didn't see any kind of outpouring.
Aside from Jack -- that what was going on in terms of the fees for you know -- Europe now.
Well you know what reduces fees money point out the door and investors are smart and you've seen.
In the last decade or so.
Remember the real boon fines from the tech bubble even Janet -- -- never fully recovered.
From what happened during the tech bubble these -- a lot of mutual funds that had a lot of money to hit him.
Although all actively managed mutual funds have been suffering because of exchange traded -- because that's where a lot of.
What do you think of this I don't wanna run this by Jack -- also said we need a financial system that has a federal retirement board.
To oversee and simplifying -- clarify.
-- retirement savings process to think tackles right there.
Or -- it's like one of those Washington come.
Nations right now yeah.
How much work of the commission -- -- always hesitant about government boards.
I wish that you could put you know is the greatest travesty is that you cannot stop more money away every year.
Tax free in a for one K plane why isn't there unlimited savings if they don't if they want the American people to save more and at our last.
Then you give us even more tax do you think congress passing if they don't know what you think congress is not at the honey pot of money there.
Do you think congress and -- moved to try to tax or take any more money out of it for like a system.
What they're -- now they want indicate that they can you do that they can't do that -- talk about -- -- need to the like the middle class right that's -- that's the main savings vehicle retirement vehicle for most Americans.
And they do that they've done -- what is there -- a bipartisan commission on the deficit.
You know the sensible thing -- talk about possibly capital and now they can put for a -- -- already capped.
Or capping anymore if they do that they lower it if they've lower the amount that you can put for a one K plan tax free there.
They're -- frankly it's the one.
The one incentive to get people to invest in you already have people it with automatic enrollment and not -- enough money in the world -- -- if they did.
If they do that what they're gonna go after investors -- they're going to try and raise capital.
That if the Democrats have their way they're going to try and raise capital gains taxes and -- try and raise dividend taxes.
Because they're gonna look for everybody -- -- they at the same time discourage.
Smaller individual investors -- -- it's just.
Do you think the vice Daniel in a yet right if you think -- but parts the commission which has Republicans -- would also go for higher taxes on for a case.
You what you don't get tax on form you get to well you get tax on a for one K.
-- when the money comes out of the if you raise income taxes you're going to raise them that raise the amount of tax that you pay on a 401K plan I.
I can't imagine in this environment when the markets tank in the in the short -- He -- gonna do anything to.
Keep people from investing in say our weekly when we're trying to get odds get out of this debt bubble that was created.
Adding and we have you know process of security -- -- -- -- -- Digging McDowell exactly so basically encourage people to us down with and that so smart so good to be the -- and -- are right next congress passed.
