Kiplinger's turning a new leaf?
I have a love-hate relationship with Kiplinger's magazine.
I love some of the practical advice about money, credit, and insurance. It is through Kiplinger's that I learned about the availability of free credit reports for residents of my state, which I now order by phone every year. I also learned some tips to shave a few hundred dollars from my annual auto insurance bill. I also use Kiplinger's to keep up with reviews of tax preparation software.
But Kiplinger's has a bad side as well. I've highlighted some terrible mutual fund reporting in Kiplinger's, like this nonsense about Fidelity's International Small Cap Opportunities fund. I'm also sick of the incessant car-related articles, which in my opinion are intended to make the magazine popular with auto manufacturers' advertising agencies.
However, the latest issue of Kiplinger's (November 2005) is different. There is not a single fluff piece on mutual funds, or mutual fund managers (well, actually there's one, but it's very small -- only a few hundred words long). And while there is a car-related article, for once it's not a buying guide, but rather a practical resource about getting the lowest price on a car via the Web ("No hassle car buying", by Mark K. Solheim.)
The reason for the absense of mutual fund fluff is mystifying. Is Kiplinger's turning a new leaf? I suspect not. The lack of mutual fund articles probably has more to do with the special report on real estate (four long articles about real estate) than a desire to reform editorial coverage of mutual funds, a major advertising segment of the magazine. We'll know for sure when the December issue comes out.
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What really mystifies me is why Mutual Funds spend hundreds of millions in advertising to begin with.
Why does something that is supposed to be so great for you and your money need to be advertised and marketed? Why not take those 100 million and invest in those great funds? After all 10% return on 100 million isn't a bad at all!
As a general rule, if I see a full blown marketing blitz (Newspaper, TV, Bus Panels, Radio, etc) from a mutual fund company (Fidelity, Janus, etc), I immediately get out or don't buy any of those company funds. Then again, I generally don't buy mutual funds anyway.
You ask a good question. Why don't mutual fund companies like Fidelity dump the advertising, and use the money for something else -- lowering fees, improving service, etc.?
I think the reason has to do with the economies of scale I mentioned in an earlier post. That is, mutual fund companies make profits by having more customers invested in a particular fund. Advertising also helps them prop up lagging funds, or get new funds off the ground.
I had the exact opposite reaction to the last issue of Kiplingers. I thought the real estate pieces were largely fluff, and pretty much un-informative. I agree with the over-emphasis on auto stuff, and the publication of mutual fund lists/rankings is just pointless in an age where the internet can give a more powerful comparison chart and up-to-date YTD information. I still think they provide valuable coverage when they go behind the scenes at different mutual funds and explain a bit about the managers, their philosophies, and such. I like that, because it identifies funds I would never have thought of---the same reason mutual funds advertise; it's a competivie marketplace and you need to attract all the dollars you can get (and, in many cases, NOT advertising sends a bigger message...everyone else is, why aren't you?).
Hello Kevin,
I agree with you about the real-estate pieces in Kiplinger's. One of them, the example where those two young guys bought a fixer-upper in a good neighborhood, fixed it up, and then resold for a profit, was atypical. It glossed over the exact time requirements and a lot of other issues that have to be addressed, ranging from loan details to inspections.
In fact, atypical examples is a recurring problem for the magazine. They find these supposedly ordinary people (anyone notice how the women profiled are almost always extremely good-looking?) to use as examples for personal finance issues, but about 10% of the time there is a very unusual circumstance which makes it a poor example. Case in point: that article earlier this year about families with debt problems ("You Can Stop Fighting About Money", June 2005) profiled this one couple who got out of their debt crisis because the husband was able to finish his Army National Guard Special Forces deployment and sign up for a $150,000/year job working as a security contract in Iraq. How many people get an opportunity like that?
I am still quite suspicious of the mutual fund manager profiles, however. The articles talk about their philosophies and successes, and gloss over the failures or downside to owing the funds they manage.
