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Letters to the Editor

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To the Editors:

John Markese’s article on hedging your portfolio (“Hedging Your Portfolio With Mutual Funds,” June 2006 AAII Journal) was exactly on target for me. I am of the belief that we are in a secular bear market, and am looking for ways to go short some of the time in the next few years. However, I do not want to use options or futures. I have used mutual funds for most of my investment life, and am in the process of picking individual stocks to prepare for my bear market outlook. I think some hedge-like mutual funds will be very helpful to me at this time.

I have already made investments in the Prudent Bear Fund and one of the funds in the ProFunds family. I am curious why you made no mention of the ProFunds, since they seem to have a good offering of hedge-type mutual funds? They offer short and long funds for various indexes, as well as many market segments. The fees are mostly under 2%, which I feel is justified by the versatility that they offer (you can trade as frequently as you want between any of their funds with no penalty).

Do you know something about ProFunds that I don’t?

Charles M. Hall
Via E-mail

The Editors Respond:

The Ultra ProFunds are certainly worth a look for their extensive hedge-like fund offerings. Our data source for the article was the Quarterly Low-Load Mutual Fund Update, published by AAII. While the Quarterly covers over 1,100 funds, eliminating those with smaller total net asset size and above-average initial minimum investment requirements ($15,000 is common among the Ultra ProFunds) keeps the Quarterly fund list manageable.

 

To the Editors:

William Reichenstein has recommended four great books on investing for the individual investor (“Recommended Reading: Four Books That Cover It All,” July 2006 AAII Journal); however, he might want to ask his wife if she would be interested in helping him with investment decisions before something happens to him rather than assuming she could do a decent job of handling the finances after he is gone. My wife loves gardening and I hate it. She knows that should she predecease me I would not be doing the gardening—the gardener would. I have no qualms about paying the gardener extra for doing more work than he does now. I have had many a widow come to me and say ‘my husband handled all the financial matters and I do not want to learn what I need to know at my age.’ The time to find out if your spouse wants to handle all the finances—including investment decisions—is early in the marriage, not after you are gone. This goes for either spouse. Some husbands are clueless when it comes to investing because the wife has been the family expert. Some families decide that they would rather have a competent financial planner to help them determine an appropriate investment policy based on their specific requirements and risk tolerance because either they don’t feel qualified to do the job or they simply don’t want to do the job.

I have run across many individual investors who have the time, the talent and the attitude to properly invest their money using a disciplined approach with low-cost investing; however, I can’t say that their spouses have the same ability and attitude.

Stephen B. Love, CPA/PFS, CFP
Via E-mail

To the Editors:

I have no quibble with William Reichenstein’s book choices (“Recommended Reading,” July 2006 AAII Journal), but no investor should go without reading “Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets” by Nassim Nicholas Taleb. Best stated by Barron’s: “this entertaining work by Taleb will prompt readers to think carefully about the nature of success and the role of chance.” It definitely changed how I view and measure success (my own and others).

Lloyd Schlagenhauf
Via E-mail

To the Editors:

As far as I am concerned, a tidbit I got from Deborah Levenson’s article (“8 Steps to Make Life Easier for Your Heirs,” July 2006 AAII Journal) has paid for my AAII membership for life! I set up my IRA and profit-sharing plans more than 10 years ago. I set up a will when I married four years ago, but neither my accountant, retirement plan administrator, nor my estate planning attorney mentioned that the beneficiaries elected when I set up the retirement plans trump any heirs mentioned in the will. I brought this to their attention after reading the article. My sister may be disappointed, but my wife and two children should be pleased!

Michael Greene
Via E-mail

 

 

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