But for investors and mutual fund companies, the announcement is bad news: The HST will be applied to mutual fund fees, which means lower returns
for fundholders.
If the market crashes and
fundholders panic, however, I'm going to be forced to come up with cash to redeem their shares.
It reflects a consistent, industry - leading focus
on fundholders, and thus, we are raising its Corporate Culture grade to an A from a B. Dimensional's investment philosophy is based on the idea that market prices reflect all publicly available information — commonly known as market efficiency.
It is not so easy for total return mutual fund managers, because they can't tell with accuracy how patient / jumpy their
mutual fundholders will be.
In» 87, when Lynch was running the Magellan Fund, he had to deal with clients clamoring for redemptions — even though Lynch had the impulse to make sweeping investments, he had to deal
with fundholders that were thinking, «My $ 100,000 is now just $ 80,000, screw that, I'm outta here» and acting on it by cashing out of the Magellan.
The
remaining fundholders should be grateful for them doing this now, though it would have been better to act sooner.
This allows them to keep more money working for
their fundholders.