My Mutual Fund Challenge

Want a real challenge? Pick a growth mutual fund today that will return 12% per year return for the next 30 years

dantTough you say?


Okay, how about 20 years?

Still seem impossible?

Well then how about 10 years?

Come on… how hard could it be?

• Online brokerage firms let you choose from over 10,000 mutual funds.

• Hundreds of funds come and go each year. Many through mergers (to hide losers) and to start new funds (big money makers).

• Only 8 funds in the past 10 years beat the S&P 500 consistently.

• S&P 500 returns were less than 2% per year since 2002– real returns.

• Add in fees, costs, loads, and taxes and you’ll have to get about 18% to net 12%.

So why is my challenge so difficult? Anyone can do it, right?

Seriously, if you’ve been at all invested in mutual funds for the past 10-15 years you are probably snickering inside and saying to yourself, “yeah right.”

Yet this is what I hear on the financial radio stations almost daily. One or two of these talk show hosts are frequent offenders – telling you that it’s possible to average 12% per year.

However, with one small caveat – you have to hold onto the fund for 30 years! Good luck with that.

I just about had enough of it today and literally yelled at the radio

Here was the situation.

A guy called in wondering if he should take control over his small retirement account at work. The caller said there was about $60,000 in it and he had 13 years before he needed it.

(This talk show host – with the initials DR – gives some good advice for the most part. When it comes to getting out of debt and saving more, good stuff. There are a few other things I disagree with, but that’s another story. )

DR went on to ask the caller what he was getting on his dough where it was and the caller guessed around 5%.

DR then calculated what a 12% return would be over the next 13 years and said, “if you would take that money and buy a good growth mutual fund and earn 12% you would have $260,000.”

My problem is I can no longer live with this 12% crap! He loses all credibility when he actually gives people false hope that it’s possible. It’s a needle in a haystack, actually the needle might be easier to find.

The caller rightly said, “Well I’m not getting those kinds of returns currently in my mutual funds.” Whereupon DR said, well you have to go back 30 years to show those kinds of returns.

But you’ll have 3 times the amount you’ll have now on your current path.

I guess DR forgot that the guy only had 13 years and he couldn’t rely upon 30 years worth of data.

If the past 13 years are any indication of the next 13 years, well, you know how this story is going to end – disaster!

Hence my challenge, pick a fund today that in 30 years will have return 12% per year.

How much money do you want to put on that pick?

How about your entire retirement plan?

What? You aren’t willing to roll the dice on your IRA or 401(k), make your pick and then hope in 30 years you were right? Neither am I, nor anyone else I talk to.

Yet this is what the “gurus” are asking you to do – Roll the dice baby, good luck, we’ll talk to you in 30 years.

DR is driving me crazy

I’ve had the opportunity to talk with a few of DR’s “brokers” that he recommends you use to buy mutual funds.

Guess what the first question I asked them was? You guessed it – Can you please tell me where to find these 12% mutual funds that your boss DR recommends?

You know what? They start to laugh. Even they know it’s absurd!

Two of them had to leave DR because they lost all credibility. They told me it’s the first question everyone asks them.

The brokers end up being fall guys that have to explain that it’s not possible. DR is even making a laughing stock of his brokers.

In the end, I really felt sorry for this caller. He was really looking for some good advice and got garbage!


Dave, oops, I mean DR, forgot to tell this guy that there are fees and taxes to be paid. Even if by some miracle this caller picked a 12% mutual fund, by the time he takes out 30% for taxes, an average cost of 1.5% in fees, he’ll end up with about 8%.

He’s not going to have $260,000 when it’s all said and done.

He probably would have been better off staying where he’s at or looking for some real strategies that actually work.

Mutual funds are not the answer – who can wait 30 years to see how well their pick performed?

So, you up for my challenge?

Chances are if you invest in a 401(k) you’ve already taken the challenge whether you like it or not.

About The Author

Dan Thompson

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