TAKING STOCK: A bridge to nowhere

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Dear Mr. Berko:

In the past year, I've talked to a number of friends who opened accounts with Edward Jones and put their money in the company's no-commission, low-cost and low-fee group of Bridge Builder mutual funds. So I visited an Edward Jones office and spoke with a nice broker who helped me with the information I needed. He suggested I sell my three Franklin Templeton funds, which I've owned for over 10 years and are heavy-load funds with high costs. He advised me to invest the $108,000 of the sales proceeds in four Bridge Builder funds to give me better diversification and protection. He would have me own four sectors and invest $27,000 in each for my individual retirement account. They are Bridge Builder's Small/Mid Cap Value Fund, Small/Mid Cap Growth Fund, Large Cap Growth Fund and Municipal Bond Fund. It seems that lots of retirees and other investors are putting their money in these funds because the charges are so low. What do you think?

-JS, Cleveland

Dear JS:

I know I've said it before, but it's worth repeating: Be careful when following the masses; oftentimes the "m" is silent. The three Templeton funds you own are far superior investments.

Eddie Jones' proprietary Bridge Builder funds have some of the sorriest performance records I've seen in mutual fund land. If I were an Eddie Jones salesman, I'd be ashamed to show this group of funds to an investor. Each of those four funds has been managing public money for a little more than a year, and their performance "sphinx." The Bridge Builder Small/Mid Cap Value Fund's (BBVSX-$9.82) six-month return from January to June was 2.37 percent, versus 3.84 percent for the Standard & Poor's benchmark. The Small/Mid Cap Growth Fund's (BBGSX-$9.97) six-month return during that period was 2.45 percent, versus 3.16 for the benchmark. The Large Cap Growth Fund's (BBGLX-$10.18) six-month return was minus 1.1 percent, versus 3.27 for the benchmark. And the Municipal Bond Fund's (BBMUX-$10.39) six-month return was 2.87 percent, versus 3.81 for the benchmark. And that salesman would have you invest $27,000 in each of these abortions just because the costs are low! Hmmph!

Eddie Jones has over 14,000 salespeople peddling this junk, and by the end of this year, they could attract over $23 billion from dumb investors into this Bridge Builder garbage. It seems to some observers that Eddie's salespeople must be lowering their standards, because so many other no-load and low-fee funds (Vanguard, Fidelity, T. Rowe Price, etc.) have much better records.

Bridge Builder funds may be among the least expensive open-end funds on the market. However, as Tom Hanks said in his classic movie "Forrest Gump," "stupid is as stupid does." Bridge Builder's poor results suggest that the funds can't afford to pay analysts who have greater performance results. When you pay cheap, you get results that are cheap. And when you invest cheap, you'd best practice living cheap, because the performance of investments will determine your comfort and living standards.

Though the Franklin Templeton sells high-commission and high-fee mutuals, the three funds you own-DynaTech (FKDNX), Biotechnology Discovery (FBDIX) and Utilities (FKUTX)-have good performance records. Do not sell FKDNX, which has a three-year total return of 9.6 percent and a 10-year total return of 8.02 percent. Do not sell FBDIX, which has a three-year total return of 11.3 percent and a 10-year total return of 11.6 percent. And finally, do not sell FKUTX, which has a three-year total return of 6.5 percent and a 10-year total return of 8.7 percent. In spite of the 4.25 percent sales charges and in spite of the annual management fees of nearly 1 percent, these funds have done well because they can afford to pay quality managers to generate exceptional performance.

That Eddie Jones guy is a disingenuous, misborn misanthrope who'd probably steal the pennies off his dead mother's eyes. Stay the course with your front-loaded funds, and tell that Eddie Jones grifter to practice skydiving without a parachute in case his bridge collapses.

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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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Published: Tue, Jul 26, 2016