Open letter to the CNBC Squawkbox Team Re:Top Performing Mutual Funds

Now we know you know!

Squawkbox team:

You do a real disservice to the individual investor with your selection of the best mutual fund that you highlight each day.

My top 10 reasons why:

1. Identify them as a sector or focused fund (which is intrinsically more risky). Many times they out-perform because their sector is hot at the moment. You further mislead when you ask for their outlook - what do you think their outlook is when they are focused, have to be long and can't invest in anything else?

2. You do not compare their performance to a benchmark (large cap to S&P 500, small cap to Russell). Most are not outperforming their benchmark.

3. You do not put up a chart of last 10 years. Most people could not take the volatility and would sell at a low before the sector came into favor.

4. You do not point out their return in the last 3 months and how that affects their 1, 3, 10 year performance. If their most recent performance were taken out they would probably not have achieved the above average level of performance you are rewarding them for.

5. You do not show an after tax return. Most do a lot of trading and generate short term gains. Also, you do not ask about the level of short and long term gains of the underlying holdings and project out the tax consequences to an investor of buying the fund today. Most would under-perform with taxes factored in.

6. You do not expose the expenses and loads indicating the hurdle the fund intrinsically has to overcome to have even a market average performance.

7. You do not ask the portion of the manager's wealth invested and where the balance of their funds are invested if less than 100% (most do not take the risk of their own funds).

8. You do not identify the growth in assets and how they are generated (a billion dollar fund that grew from 100 million from investing success is a lot different than a billion dollar fund that raises a 1,100,000,000 from investors).

9. You do not identify manager or investment company conflict of interests. You need to identify the background of the manager(s) and how it can create conflicts (did they work for companies in the past that they invest in today? Probably yes.).

10. How you selected the fund for the show. They are not always the 'best' nor do they have the highest 'Morning Star' rating (which you also do not explain, nor show the performance of funds after they achieve the 'Star' rating') exposing YOUR conflicts.

We are in serious times when the individual investor shoulders almost all of the responsibility for their retirement, etc., and your actions above are hurting not helping them. There is no impact on the professionals that watch your show too, they know this stuff.

I know the corporate and commercial pressures you face making the above difficult to do, but at some point you have to look in the mirror and determine if you are a good guy or bad.


An advocate for the retiring baby boomer (of which I am one)

PS, I couldn't let this go, sorry....

11. When a manager says he runs a value fund (how many people use the name Graham and Dodd and Buffett and you let this go unchallenged?) you come back and ask about GROWTH. I'll make the assumption that you don't understand the difference between how and why value portfolios appreciate, the historical out-performance of value, and the fact that the categories of value and growth is an academic factor-all stock should be bought because it has value and is expected to grow (a subject for another top 10).

Editor's note: When you watch and listen to financial news or advertisements, be aware that all is not what it appears to be.

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