The Naked Investor

A review by Andrew Forward, of John Lawrence Reynolds's book on trying to enlighten novice investors about the potential downfalls of trusting your financial advisor

No load means no sales commissions. MER is the management fee raio (i.e. if there is $1000 in a fund, a MER of 2% means that every year your fund managers takes $20). DSC is a deferred sales charge (that means that if you want to sell your mutual fund early, it will cost you - usually the fees are on a decline balance from 8% to 0% over a 7 year period).

Beware of *risky* governemnt bonds. The sales commissions can be upto 2%, which is earned by discounting the bond price and this is rarely reported to the investor. Beware of high MER funds. These are really expensive to own. Trailing fees. These are paid to your broker as look as you keep the mutual fund - so it is in his/her best interest for you to keep a fund than sell it.

The industry always says:

You are not smart enough to do this yourself

when it comes to buying investments. But, when you suffer a loss, they always tout:

You should have known about the risk

There is a difference between risk and uncertainty. Risk can be measured and accounted for (it is balanced against reward). Uncertainty cannot be accounted for (and is therefore not balanced).