AboutWarren Boroson Expertise Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.
Experience Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.
I Would like to know, how an mutualfunds creates funds. Can any one create mutualfunds?. Are there any sec regulations for creating and managing mutualfunds? My third question is, Is it true that mutual fund managers collect to much fees for there services, and what should I pay an manager for managing my mutualfund investments
Marc clarkson
Answer Dear Marc Clarkson:
To create a mutual fund, you need the approval of the Securities and Exchange Commission. A lot of paperwork is involved, and you will surely need a lawyer. Who holds the money? Who writes the prospectus? That sort of thing.
While Bernard Klawans of the Valley Forge Fund in Pennsylvania advises people that $12,000 is what it will cost, most people wind up paying more--$50,000 perhaps. A leading law firm dealing with mutual funds is Townshend Nile in Cincinnati. Klawans has helped 20 people start mutual funds.
Mutual fund managers make a lot of money. Marty Whitman has compared it to owning a tollbooth on the George Washington Bridge. In general, the expense ratio of mutual funds is 1 percent -- more if it's a foreign fund, less if it's a fixed-income fund. Morningstar Mutual Funds rates funds on their expenses, and before investing in a fund, you might check out what Morningstar says about its expenses--and about the fund in general.
On Sunday, an article of mine about two young people who just launched a mutual fund will appear in the Daily Record--go to www.dailyrecord.com, and look under Business/home.
