On Wall Street, everything boils down to making money. If you think your broker or fund manager is juicing returns to put more money in your pocket… well, sadly, you’re mistaken.

In fact, the father of index funds, retired Vanguard CEO John Bogle, wholeheartedly agrees. But the worst part, he says, is that retirement investors are still being duped.

If you’re an investor still buying into the fantasy, Steve McDonald says it’s time to snap out of it. Get the full scoop in today’s “Slap in the Face” Award video.

Transcript:

This week’s “Slap in the Face” Award goes out to Wall Street and retirement investors. And it comes compliments of Vanguard founder John Bogle, the father of passive investing.

Bogle said in a recent interview that Wall Street is all about making money, just not about making money for investors.

Remember, this isn’t coming from some Washington bureaucrat; it’s coming from a guy who has spent his professional life in the financial business.

He says that stock trading ultimately benefits the handlers – brokers, advisors and mutual fund managers… certainly not the retirement savers.

What’s most surprising to him isn’t that Wall Street is all about themselves and their “assets” (our money). It’s that retirement investors have actually bought into the wealth fairy tale just as much as Wall Street has.

Bogle says the problem with the mutual fund industry isn’t the concept of funds – they have always made sense. Instead, the problem is outside ownership of funds. That setup prioritizes moneymaking for the owners over the investors.

The second issue is fees and the lack of disclosure. Fees create a drag that most investors aren’t made aware of until many years down the road. At that point, the damage is irreparable.

The Best Long-Term Investment Strategy

Don’t invest in just any dividend-paying stock... Pick up shares of the 10 best “Dividend Aristocrats” - stocks that have increased their dividends every year for the past 25 years. But not all of these stocks deserve a standing ovation, so we’ve picked the 10 best based on yield and payout ratio. 

Most investors pay an annual fee of 1% to their advisor. That’s in addition to the 1% charged by each mutual fund they’re invested in. Even before inflation and taxes, these fees can eat up 33% to 50% of your long-term return.

The idea that Wall Street’s real job is to “create capital for business” is bunk, according to Bogle.

The money generated by the Street from equity capital formation is a measly $256 billion a year. That pales in comparison to the trading run by brokers, advisors and funds, which generates $48.6 trillion per year.

That’s right; speculators and investors account for 99.5% of Wall Street’s total activity. And almost all of it comes from the pockets of investors via their retirement plans and funds or directly from their accounts as management fees.

I always knew the cost of doing business through most of the traditional channels was expensive, but I had no idea the numbers were so big.

If you don’t know what your investments are costing you, I’d take some time and start asking some questions.

Good investing,

Steve