THE "TOTAL RETURN" SHELL GAME

Just what is this "total return" thing that Fixed Income Investment Managers
like to talk about, and that Wall Street uses as the performance hoop that all
such managers have to jump through? Why is it mostly just smoke and mirrors?
Here's the formula: Total Income
Received + (or -) change in Market Value - Expenses = Total Return.

How many of you remember John Q. Retiree? He was that guy with his chest all
puffed up
last year, bragging about his 12% "Total Return" while he secretly wondered
why he only
had about 3% in spending money. This year he's scratching his head wondering
how he's
ever going to make ends meet with a total return that's quickly approaching
zero! Do you
think he realizes that his actual spending money may be higher? What's wrong
with the equation? How will they compare Mutual Fund Managers without it? Wall
Street doesn't
care because investor's have been brainwashed into thinking that Fixed Income
Investing
and Equity Investing can be measured with the same ruler. They just can't,
and the "total
return" ruler itself would be thrown out with a lot of other investment trash
if it were more
widely understood.

Now let's change the formula and the name and focus on the most important
thing about
Fixed Income Investing...the Spending Money! Here's the new formula: Total
Income
Received + Realized Capital Gains-Expenses = Total Spending Money! So if John
Q's
Investment Pro had taken profits on the bonds held last year, he could have
sent out some
bigger income payments and/or taken advantage of the rise in interest rates
that is
happening right now! Better for John Q, sure, but the lowered "Total Return"
number could
have gotten him fired!

Most of you know who Bill Gross is. He's the Fixed Income equivalent of
Warren Buffet, and
he just happens to manage the world's largest "open ended" Bond Mutual Fund.
How is he investing his own money? He's removed it from the "Total Return"
Mutual Fund he manages
and moved it into...CLOSED END Municipal Bond Funds. Interesting, I bet he
read "The
Brainwashing of the American Investor."

If the next three sentences don't make complete sense to you, you need to
learn more
about Fixed Income Investing...try:
sancoservices.com/fixedincomeinvesting.htm for starters.

Higher interest rates are the Fixed Income Investor's best friend. Lower
interest rates are
the fixed income investor's best friend. Absolutely never buy an "open end"
Fixed Income
Mutual Fund.

Steve Selengut
steve@...
800-245-0494
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Read "The Brainwashing of the American Investor" Book Reviews


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