Why Are Mutual Funds Forbidden to Protect Your Money?

Rachel Victoria High Yield Investment Planner

By Rachel Victoria, MSFS, former CFP

October 20, 2008

One of our Members asked me "why Mutual Funds can't achieve the same high returns that our Advisory Services do?".

Well, most people aren't aware that there is a Security & Exchange (SEC) Law that forbids Mutual Funds from investing a large percentage of their funds in cash. The legislation occurred after the Great Depression. It's called the Investment Company Act of 1940. Basically, it restricts Mutual Funds from borrowing, going short, investing in too much cash, or investing in assets outside of the fund's asset class.

What does this mean to You? If the market is going down (and that could be in either the stock or bond markets) the Mutual Fund Manager's are legally restricted from protecting your money by placing it in cash. In fact, in some situations, the Fund Manager's may have to keep as much as 98% fully invested in stocks or bonds while the Fund Values are falling.

This explains why most Mutual Funds usually have down markets in the same years. It may not be because you don't have a good Mutual Fund Manager. Even when the Managers know the market is going down, their hands are tied and they are forbidden to put money in cash as they watch their primary Fund assets decline in value.

On top of that, if an Investment Company sees that many of a Financial Planner's or Broker's clients are moving out of Mutual Funds and into Cash, it is almost guaranteed a Compliance Officer will be contacting that Professional and telling them they need to keep their clients fully invested even in a down market, because that is where the Investment Company makes their profits.

What Should You Do?

1. Stop leaving yourself vulnerable to losses every 5-7 years in Mutual Funds - the main problem with the "Buy and Hold" Strategy in the stock and real estate markets.

2. Set aside an appropriate Cash Reserve for emergencies.

3. Create consistent High Yielding Screened Income for your growth portfolio.

4. Ensure that a Proven Expert is Trading or Managing your portfolio, without restriction from protecting your money in Cash assets.

For more information on PreSelected and Screened Verified Advisory Trading Services with a Guarantee, please visit our website below. These services are still bringing in Substantial Profits even while the Stock Market is Depressed and Volatile. And, many of these Services can utilize your IRA and 401K Funds to help you recoup some of the devastating losses that have occurred recently.

Please visit our website to learn more:

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The author, Rachel Victoria, is a former CFP with an MSFS in Financial Planning. Ms. Victoria owned an American Express Financial Services Franchise for 20 years. Rachel currently enjoys researching, testing, and writing about alternative Passive Income Strategies.

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