Mutual fund fees for many funds are on the order of 1.5% per annum. Given enough money in the fund to begin with, a fortune can be made for those administrating the fund in fairly short order. Dogbert just decided to up the ante....his attitude reminds me of the H.L. Menken statement: "No one ever went broke underestimating the intelligence of the American people".
The percentage is hyperbolic, but the principle is accurate. Many financial planners take a percentage of the portfolio as their compensation. If I'm taking a percentage of your portfolio every year, I'm only providing value for money if I'm making their portfolio grow by more than that percentage, over and above the return you could easily get in guaranteed investments. The way the market's been lately, there are a lot of people who have been paying someone a lot of money to watch their money shrink.
That is true, assuming Dogbert works in compound interest. But in actuality, you should look at the contract to know what happens. Anything that can be described in a couple of pages of Super Ultra Fine Printâ„¢ can be the actual terms. Including clause like what would happen if Dogbert looses money for the client, the client decides to terminate contract, or the sun rises to the east. Sky is the limit.
I would like to check that I understand this one properly, let's say you sign up to dogbert's scheme and pay in $100 each year... can I confirm that the following is what would occur
the first year you'd end out with $90 saving and dogbert gets $10 for that year...
the second year you have $171 saving and dogbert gets $19 for that year
the third year you have $243.9 saving and dogbert gets $27.1 for that year
the fifth year you have ~$368.56 saving and dogbert gets ~$40.95 for that year
the tenth year you have ~$586.19 saving and dogbert gets ~$65.15 for that year
So after 10 years, having invested a total of $1,000 you'd only get to see 586.19 while dogbert takes the rest... is that roughly correct? ignoring any taxes/additional dogbert fees.
I wouldn't bet on that. Lots of the "financial wizards" who were caught in the economic meltdown didn't seem to understand what was obvious to many -- the price of houses was a bubble and was going to bust. I remember how, years ago, Scott poked fun at the Great Internet Bubble telling us that Dogbert would give his "secret sell signal" to the DNRC members and we'd cash out ahead of the bust. Scott saw it, but lots of supposedly very smart people, professional investors (who could be replaced with a random number generator or monkeys, in many cases) did not. Being rich isn't necessarily a function of intelligence. It helps, sure. But a lot of rich folks got that way because of dumb luck or they knew someone that gave them a nice little sinecure. Also, the things a lot of people do to get rich are enough to make most people cry at the thought of being that kind of person.
Yeah, I think Dogbert would find enough fools with money to invest in his schemes.