I expect more from The Wall Street Journal.  In a piece entitled Adjusted for Inflation, Dow's Gains Are Puny, the paper illustrates that on an inflation-adjusted basis, the Dow Jones Industrial Average has returned only 1% per annum over the past 80 years.

Everyone who has any financial background at all is fully aware of the remarkable research performed by Dr. Jeremy Siegel that proved that 99% of investor's real, inflation-adjusted rates of return come from reinvested dividends over several decades and that, furthermore, as a result of this "reinvested dividend power", stocks were the single best long-term investment in the history of the world despite experiencing bad decades from time to time.

The piece triumphantly proclaims that over the past 80 years, the Dow Jones Industrial Average is only 2x its inflation-adjusted value, thus effectively turning a $100,000 investment into $200,000 in purchasing power.  Historically, however, the Dow's dividend yield has fluctuated between 3.2% during market highs (e.g., 1929) and 8% during crashes (e.g., 1933 and 1973-1974).  Over the past 10 years, the market as a whole has been expensive, so dividend yield has fallen to 2% or less which, historically, is an aberration.  Since our hypothetical investor parked his money 80 years ago, though, let's split the difference between the 1929 high and the 1933 low (5.6%) and say that's what he locked in when he bought his shares.  The story completely ignores this $5,600 annual cash dividend income for the investor acting, as it were, as if it were Monopoly money that had no value! Moreover, it ignores Siegel's work, which show that most of his gain in real net worth would come by pouring that money back into stocks each year to get more dividends in the future.

This was, in my opinion, a total epic FAIL on the part of the paper.  Why does it upset me?  Because some honest, hardworking family is going to read this tripe and not realize that the long-term power of compounding, combined with the tax benefits of various retirement accounts, the risk-free employer matching funds offered by most companies, and reinvested dividends make equity investing their best chance at achieving financial independence.  For that reason, it is utterly infuriating that this sort of financial malpractice is allowed to see the light of day.

After I told you yesterday that I was considering launching a mutual fund, I thought it might be useful to share with you what new investors need to know about how a mutual fund structure works.  By learning how a mutual fund is structured, the role of the fund's board of directors, the role of the fund's adviser, and other important parties, you may have an easier time understanding a prospectus, which is the legal document that explains a fund's goals, objectives, and risks.  Take a few moments to educate yourself ...

My resolution for 2010 may just turn out to be launching my own mutual fund.

For the past few months, I have been researching the idea of turning over control of day-to-day operations of my businesses to other people and launching a new registered investment adviser to serve as the portfolio manager of a mutual fund that specializes in global value investing.  It would give me a way to actually manage money for the countless people that always seem to want to know what I'm buying or selling, and do it from an easy-to-understand investment vehicle.  After all, the fund could be bought through any Roth IRA or comparable retirement account.  This would provide a simple, straight-forward solution because I have zero desire to actually setup a wealth management office (I don't want to deal with clients or solve their portfolio issues - that's not my personality.  My passion and specialty is selecting value investing stocks from around the world and putting them in a portfolio in which I also invest my own money.  For those whom wish to own securities like the ones I chose for the fund, great.  For those who don't, that's fine, too).

Right now, I'm not comfortable writing about specific investment ideas because I don't want there to be any conflict of interest.  Throughout December, for instance, I found an unbelievably cheap company with a strong balance sheet, 7%+ dividend yield, large insider ownership, and a p/e ratio of under 6.  The company was so small, however, that if I had mentioned it, it could have effected trading volume and I'm going to avoid that like the plague.  Had I been operating a global value fund, I could have simply put a portion of the fund's assets into it and everyone would have owned the same stock I had been buying for my private accounts.

My only hesitation is my own personality.  I know that if I do launch a mutual fund, I'm going to feel the obsessive need to focus on it day and night.  My work habits are a bit compulsive.  Right now, I show up to my own companies, read when I want, and invest my own family's money.  With a publicly traded mutual fund, I could see myself up at six in the morning, working until midnight, pouring through 10K disclosures like I did in college when I began first amassing a decent amount of capital and putting it to work in companies such as Direct General, Yankee Candle, AutoZone, and American Eagle Outfitters, the profits from which helped me fund my own companies later.

I have several meetings scheduled with fund service companies over the next month to examine their solutions.  Right now, I don't feel like I have enough information to know whether this is something I want to do or not, but the more I learn, the higher the probability that at some point in the future, there will be a mutual fund with my name on it through which I invest a majority of my personal net worth.

Just writing to thank all of my readers for another great year and wanted to let you know that I'm excited about some content coming up that I've been working on for the past few weeks.  We're going to cover a lot more basics in 2010, including investments such as how mutual funds, variable annuities, and unit investment trusts work.  I'm looking forward to sharing them with you!

This year can be the year you build your portfolio, start saving money, and learn how to get rich.  I'm going to do my best to provide you with a robust collection of resources that will help make that journey easier and less frightening.

If there is anything specific you want to learn about, send me a message!  I'd love to hear from you and would like to find a way to fill in some specific knowledge gaps you all may have.