Jack Neally

A member of the Philip Greenspun's Homepage community since November 30, 2006

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November 30, 2006, on Money, Money, Money:
Two additional items you might have mentioned: 1. Taxes & Inflation. Long term ownership of individual stocks has a significant tax advantage over mutual fund ownership, due to tax-free compounding of capital gains. Most mutual funds distribute capital gains, as they frequently turnover portfolio holdings. This applies to index funds too. Seperately, inflation has a greater effect on eventual return than you suggest. Because stock prices rise with inflation over the long term, investors pay capital gains taxes on grossly inflated, empty profits. This is big. 2. Responsiblity for CEO's stealing from shareholders. Since management reports to the board of directors, and the BOD represents shareholders, how do they get away with it? Answer: Most shareholders use mutual funds. Mutual funds do not allow their clients to vote the shares in the funds, even though the clients own the shares. Instead, fund managers vote the shares. Guess who recently played golf with the fund man...