Article: The Dead Man Fund
This 7 minute article that appeared in Longreads hooked me in the first paragraph:
In 1989, Morningstar, Inc., an advisory service, issued a strongly worded and unusual recommendation to its clients who had placed money with a firm then called the Steadman Funds (later known as the Ameritor Funds). “We urge you to cut your losses and get out,” Morningstar counseled. Doubtless, some investors heeded this advice. Many couldn’t, though, because they were dead.
I wanted to learn more and hopefully your students will also. It's a great read during your investing unit as here are some of the key terms/concepts covered:
- Morningstar: provides rating system for mutual funds based on star system (some question the value of their ratings)
- Mutual fund marketing
- No load funds: no commission is paid to purchase the mutual fund
- Performance comparison relative to the S&P 500 index: did the fund beat the market (as represented by this index)?
- Fund expenses and their impact on investor returns
Questions for students:
- In the early days, how was Charles Steadman able to grow his investment firm and increase the assets (dollars) that he managed?
- How did his expenses to run his investment fund compare with other funds?
- How can investors find out what the expenses are for the funds they own?
- How did Steadman's funds perform? Provide evidence from the article to support your answer.
- List all the warning signs that investors had to help them avoid these funds.
- Why do you think that so many investors kept their money with Steadman despite its poor performance?
- What can you learn from this example to be a better investor?
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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