Foreword ix
Preface xvii
Acknowledgments xx
Introduction 1
Chapter 1: Mutual Funds: A Painful Birth 7
In the Beginning 7
A Good Idea 11
Cracks in the Good Idea 13
Chapter 2: Searching for Rational Investors
in a Perfect Storm 17
A Perfect Storm 17
A Simple Survey 20
The Fortune 10 Test 22
The Performance Test 25
Value Investing: A Behavioral Finance Perspective 36
Chapter 3: The Anatomy of the Stock Market 43
The Stock Market 44

Chapter 4: Investing at Warp Speed 57
Sell It All Every Year? 58
Massachusetts Investors Growth Stock Fund 61
Investing Blind 66
Chapter 5: Greed Is Good: The Appeal of a Publicly
Owned Fund Management Company 69
T. Rowe Price 70
Profi tability 71
How to Make 80 Percent a Year without
Breaking the Law 72
Confl icts of Interest 75
Grow the Assets 78
Who’s Watching the Store? 80
The Greed Factor 82
Candor Becomes a Casualty 85
Form over Substance: Shame on the SEC 86
The Failure of Candor Runs Deep 87
As Good as It Gets? 92
Chapter 6: The Investor’s Dilemma: Long on Life
Expectancy, Short on Income,
and Searching for Guidance 95
A Crisis of Moral Imagination 95
How the Other Half Lives . . . 102
Everyone Agrees: We Are Frightfully
Poor Investors 104
And Now a Word from Pogo . . . 105
What Pogo Forgot 106
Of Bubbles and Swans 108
Are You a Patient Investor? 117
Chapter 7: The Industrialization of Mutual Funds 119
Margin of Safety 120
Economy of Scale 121
How the Marketing of Mutual Funds Came
to Look like Soap 121
Franklin Resources—A Study in Economies
of Scale 125

Industrialization 127
Retailers, That’s Where the Money Is 128
The Death of Security Analysis 129
Asset Allocation 132
Rebalance My Portfolio . . . You Said What? 133
A Witch’s Brew 137
About Those Benchmarks . . . 138
Wrapping Up the Benchmarks 140
Managing by Rote Can Hurt . . . Badly 142
Chapter 8: Through a Window . . . Darkly 145
The First Story behind Those Numbers 147
Multiclass Fund Shares 149
Now Here’s a Stealthy Way to Infl uence
a Broker’s Advice 152
“Soft Dollars”?—Hey, That’s My
Hard Cash 155
Revenue Sharing 156
Corruption by Committee: The Story
Gets Worse 159
Devious and Deceptive? 161
What’s Missing from the Disclosures? 164
Some Particulars 164
Boards of Directors: Watchdogs or Lapdogs? 166
Some Unresolved Questions 169
Chapter 9: How to Pick a Mutual Fund 173
An Overview 173
Back to Pogo . . . and You! 174
Buy a Mutual Fund? 178
The Good Funds Fairly Shout Out Their
Strengths 180
What to Look for in a Stock Fund 181
Price and Value 185
Index Funds 186
Two Stock Funds 189
Notes 193
Index 213