Investing in Mutual Funds versus the TV Series Lost in Space: Is There a Difference?

By: Christian Koch, CFP®

This true story begins September 1997, the date my wife and I got married. It was a traditional wedding that took place in a United Methodist church on 9/13/1997. After the ceremony, my uncle gave us a wedding gift of a $1,000 investment in the Franklin-Templeton Mutual Funds. At the time, his strategy was typical conventional wisdom in that he allocated 20% of the $1,000 gift to go into the small cap fund; 20% to the international fund; 20% to the gold fund; 20% to the large cap fund and the last 20% to the bond fund.  A simple diversified investment strategy. Right? Wrong!

Here’s where the Lost in Space, a science fiction TV series comes into the story line. The TV series was centered on the Robinson family which set out on a space mission to visit other planets with hopes of colonizing it. However, their mission is immediately sabotaged by a crew member who reprograms the robot. The ship is ultimately saved but consequent damage leaves them lost in space. Eventually, the Robinson family spaceship crashes on an alien world where they must survive.   

Well, our family is like the Robinson family and we had a Lost in Space experience with our wedding gift. Ten years later and five children later our $1,000 investment, in a reputable mutual fund company was worth $970.00. How could this happen? The simple answer: Mutual Funds are a flawed investment concept after fees, lackluster performance and absent tax management.

The solution: Separately Managed Accounts or (SMAs) appear to be a better solution in today’s investment climate. The individual benefits of SMAs are customization from a portfolio perspective, more transparency versus mutual funds as all accounts are titled in the owners name and active tax management.  

Following this story and the road that we traveled, my hope would be that other individuals and families make wise choices with their investment dollars and that we can spend more time with our families versus monitoring our mutual fund investments.

Those interested in learning more about Separately Managed Accounts versus Mutual Funds are encouraged to visit our website at www.kamsouth.com

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