Transcripts

"Money File"- Mutual Fund Financial Aid

SUSIE GHARIB: Tonight's money file guest says mutual fund firms could do more to help battered investors. He's Jason Zweig, personal finance columnist at the "Wall Street Journal."

JASON ZWEIG, PERSONAL FINANCE COLUMNIST, WALL STREET JOURNAL: Now is the time for all good funds to come to the aid of investors. Here are some ways that mutual fund companies can help their investors survive this bear market. First of all, they should cut their fees. Investors didn't mind paying over 1 percent in annual expenses when their funds were gaining more than 10 percent a year. But those fat fees add insult to injury during a bear market. Many investors feel they could lose their own money for free and don't see why they should have to pay well over 1 percent a year to have someone else lose it for them. That could lead many investors to stuff all their money under a mattress, which won't help the economy one bit. So the fund companies should give anyone who has stayed invested in a fund for at least five years an immediate fee discount. Second, mutual funds should stop renting stocks and start owning them. The average fund holds its typical stock for only about 11 months. With stocks now at their cheapest prices in decades, the holding period should be measured in years, not months. Finally, funds need to be less taxing. Nothing will turn off a fund investor quite like losing money and having to pay capital gains taxes to boot. If the managers kept more of their own money in the funds and felt the pain of a high tax bill themselves, I think we'd see funds get a lot more tax-efficient in a hurry. If mutual funds became more truly mutual, everyone would be better off. I'm Jason Zweig.