This article was originally published on January 18, 2017. It has NOT been updated or revised since that date, the new versions of the ad we’re now seeing have dropped the “Retirement Blackout” pitch about April 10, since that fiduciary rule change was delayed in Washington, but otherwise the “26(f)” pitch appears unchanged.
This ad is so ridiculous that I couldn’t convince myself to write about it when it first started running… but the questions are piling up, so it’s time to dig in.
Here’s the fear mongering that they start with:
“On April 10 2017, the Department of Labor will execute a controversial plan.
“It’s one that few knew was within their power.
“And they’re using an obscure clause buried in Title 29 of the US Labor Code to pull it off.
“CNBC warns this ‘will force major change’ on American retirement planning.
“The Wall Street Journal is reporting it ‘could cost American savers $80 billion.’
“And time is running out to prepare for the aftermath.”
Keith Fitz-Gerald says that a “unique class of investments” called “26(f) Programs” are “caught in the crosshairs” … so what does he mean by that? That’s what most of the questions I’ve been getting are about, our readers are asking what a 26f program is and how they can invest in these miraculous-sounding things. Here’s what Fitz-Gerald says these “programs” are:
“They Rose to Prominence During the Great Depression, Thanks to President Roosevelt’s Team That Also Created the FDIC and Social Security.
“26(f) Programs allow people to ‘enroll’ with one small investment stake.
“And they give investors the opportunity to earn aggressive monthly income combined with huge lump-sum payouts.
“You can potentially:
- Get paid $2,000… $5,000… even more… every month for the rest of your life.
- Then still grab six figures in one shot.
“And on top of that, there are 26(f) Programs that can operate as 100% legal tax havens.”
Then the ad runs through several stories that sound miraculous, but are really just success stories of people who saved for decades and were able to build up a next egg and pay for a reasonable standard of living in retirement.
Most of these are pulled from public news stories, I expect — I tracked down one example just to confirm that. Here’s how Fitz-Gerald pitched this person’s story:
“Roy Nair used to work for a natural gas distributor in Missouri.
“But today, he’s retired a millionaire.
“Like Darrow, Roy had his savings and a diversified investment portfolio.
“He also went BIG on 26(f) Programs.
“But he didn’t have to invest BIG to do so.
Are you getting our free Daily Update
"reveal" emails? If not,
just click here...“He was only kicking in $300 a month.
“Yet it was key to his now seven-figure net worth.
“And the income he’s receiving from 26(f) Programs has helped give him complete financial freedom.
“Roy likes to live frugally, so he only needs about $50,000 a year.
“But he also likes to splurge on at least four trips a year to places like Chile and Jamaica.”
That’s a hyped version of the story of Roy Nash, which was covered in a “dream retirement” story by CNN a couple years ago. These stories run all the time in financial magazines, it’s kind of the worried midlifer’s version of pornography — you can see pretty pictures of happy families who are living well in retirement, and it gives you the idea that such a dream is not so crazy for you.
As with most of these stories, though, the key is lots of saving and steady investment in the stock market through fairly mainstream vehicles — these people don’t achieve “retirement dreams” by betting big on some secret kind of investment you’ve never heard of, it’s far more common for them to achieve these dreams by betting small on something very ordinary like an index fund, and doing so with as much as they can afford every week or every month. Compounded investment returns add up, but it all starts with saving and letting your money be at risk in the stock and bond markets instead of fearfully hiding your funds in a bank account (or worse, under your mattress).
The actual story of Roy Nash is that he retired at 55 with about $800,000 saved, grew it to a million over the next six years, and lives that travel and thrifty spending lifestyle — he taught himself investing when he was young, in his early 20s, and he put 10-15% of his income into a 401(k) every year… and also, as teased, put another $300 a month into other investing accounts, investing in a variety of dividend stocks and mutual funds, including closed-end and index funds, and reinvesting his gains into more stocks and funds. You can see it here, but I promise: There’s no secret.
The trick as I see it… if you insist on calling it a trick or a “secret”… is in saving consistently at a relatively high level, and not speculating too much on dumb things that have a high likelihood of going to zero (recovering from 100% losses that are gone forever is far harder than recovering from 20% drops in a normal “bad” stock or fund pick), and let time, dividend and capital gain compounding, and the general rising tendency of the stock market and the economy, grow your wealth.
After a few stories of folks like that, Fitz-Gerald jumps back into fear mongering:
“These People Are All Living Their Dreams…
“Yet, Come April 10, 2017, the Department of Labor Is Going to Make it Very Hard For Others to Join Them.
“This is when the Federal government will implement their retirement blackout.
“And there’s no way to stop it….
“But There Is Some Very Good News. You Can Make an Absolute Fortune from 26(f) Programs For the Rest of Your Life!
“And There Is Nothing Uncle Sam Can Do to Stop You!
“By taking one simple action today, you can get into 26(f) Programs before the blackout.
“And you could set yourself up to make $68,870 or more…
“Every single year…
“While also becoming able to earn an aggressive monthly income to help you live the retirement of your dreams.”
That “one simple action,” of course, is subscribing to Fitz-Gerald’s newsletter and putting your money into the investments he recommends — which, to be fair, are both easy and uncomplicated things to do (though the subscription is slightly sneaky, since they offer it at $39 but then auto-renew it each year at $79).
Then the ad tells us that there’s some secret way around this “invest starting in your 20s and wait for decades to reap the rewards” strategy that no one wants to hear about (both because it’s hard and boring for most people, and because many of us are not in our 20s and don’t have a time machine):
“You Don’t Have to Invest in a 26(f) Program in Your 20s or 30s… and Then Wait Around for Decades to Reap the Rewards Like a 401(k).
“Take Dane LaVoy of San Diego.
“For most of his life, Dane had a normal investment portfolio and savings plan.
“In fact, he didn’t enroll in a 26(f) Program until he was in his forties.
“But I bet he thinks that’s the best financial decision he’s ever made.
“Because it played a major role in Dane saving nearly $1.4 million for retirement in only eight years.
“Imagine having an extra $14,583 a month on average to spend as you choose.
“Well, Dane doesn’t have to imagine that.”
And wouldn’t you know, it turns out that this is, again, a real person (name changed to make it harder for the Thinkolator, naturally), and the story was taken from a Kiplinger’s article from 2011… and, though I hate to say “I told you so,” this is another story of a person with a high salary who saved a massive percentage of his income (in some years, saving as much as $250,000 a year) to build up that $1.4 million in eight years… and, yes, that money was invested in regular old stocks and mutual funds that were managed by his brokers, not in some “secret” 26(f) program that no one else knows about.
His name is actually Dane Lacey, if you’re curious, and that story from Kiplinger’s is here… it’s called “How to Stash $1 Million+ in Savings.”
So no, there is no secret 26(f) program that “played a major role” in Dane Lacy saving $1.4 million… what played a major role was his ability to save huge amounts of money, and his ability to invest it in the market in a sane and reasonable and diversified way.
Another example given, “Retired Army Major Joe McCord,” is, likewise, a story of someone who socked away a lot of savings by investing each month in mutual funds — that example is actually borrowing the story of Joe McLaughlin, who was covered in a CNNfn story called “Mutual-fund Millionaires” back in 1999 when there was a thread of hype going around about the “death of Mutual Funds” as investors started to buy stocks more directly into the internet boom… McLaughlin did it the old fashioned way, investing in funds each month, here’s a bit from that story on CNN’s website:
“McLaughlin has squirreled away money every month in mutual funds for 16 years, and he expects to become a millionaire in about three years.
“‘It’s been boring, really,’ said McLaughlin, 45, a retired U.S. Army major from North Carolina. ‘We don’t do junk bonds, pork bellies, Internet funds. It’s just dollar-cost averaging.'”
I don’t know if they ever went back and talked to Mr. McLaughlin to see if he did become a millionaire by 2003, but his story was that he put a rising amount of money into some diversified Fidelity mutual funds, and had returns averaging about 19 percent a year — that sounds like an exceptional return, but from 1995 to 1999 the broad market had returns of at least 20% a year, with several of those years well into the 30s. My guess would be that it took him a little longer to reach a million dollars because the market was so weak from 2000-2002… but if he kept up the monthly investing in those years, It’s certainly possible that he bounced back just fine in the mid-2000 bull years and probably did get to his million bucks.
So what are they saying, are these “26(f)” programs just mutual funds?
Here’s a bit more from the ad:
“Since Most 26(f) Programs Are Run by Big Banks and Financial Institutions, They Can Provide Instant Liquidity.
“You never have to wait for a buyer.
“The issuer is legally obligated to buy it back from you for full price.
“And what full price means isn’t up for debate either.
“It’s usually determined at the close of the market each day.
“And there are even 26(f) Programs that allow you to invest in the banks themselves.
“Between Last February and August, PNC Bank’s Stock Barely Had a Pulse… It Rose Only 1.62%!
A 26(f) Program Tied to PNC Though, Pummeled That Return by 1,351%!”
Fitz-Gerald (or, to be fair, his ad copywriter) uses this kind of example a bunch of times in the ad, but don’t be swayed by those “pummeled that return by 1,351%!” numbers — that just means that while PNC shares rose 1.62%, there was a mutual fund of some kind that owned PNC shares and that rose by 23% (that’s 1,351% higher than 1.62%). A fund going up 23% in a six month period is certainly nice, but it’s not life-changing or unheard-of (and it never keeps going that way for very long, unfortunately).
There are several references to the creation of these 26(f) programs back in the 1930s, and to buying stocks at a discount through 26(f) programs, so the made-up “26(f)” name is clearly just a very loose reference to mutual funds… including both closed-end funds (which typically sell at a discount to their net asset value) and open-ended funds (which almost all offer daily liquidity at net asset value).
Mutual funds do sometimes get in on pre-IPO investments, and they can buy a much more diversified portfolio of high-priced stocks than many investors can, particularly young investors who are starting with a small portfolio, and good, solid and well-managed mutual funds are very much a “buy and hold and compound” investment that may be under-appreciated in these days where most investors lust after either rapid trading profits in ETFs or the excitement of individual stocks and decry active management and the (sometimes) high management fees that mutual fund investors can be saddled with.
But, of course, they are not magic… and they are not being “phased out” or subject to a “government blackout” — the government is very much motivated to make sure that people can save and invest as much as possible, and mutual funds and retirement accounts are a big part of that. So what the heck is this “blackout” part from Fitz-Gerald’s ad? Do you have to be in by April to invest in mutual funds?
Uh, no.
Here’s that scary bit from the ad:
“So What Happens After April 10, 2017 When the Retirement Blackout Goes into Effect?
“For those who don’t take matters into their own hands…
“For those who don’t learn everything they can about these 26(f) Programs…
“I fear they’ll never take advantage of them.
“The blackout could cause them to miss out on $68,870.
“Heck, this Retirement Blackout could cause them to miss out on 10 or 20 times that.
“The Federal government looks at 26(f) Programs as holdovers from another time.
“They certainly don’t want every day Americans utilizing something so powerful with so many tax benefits.
“They do have a $19 trillion federal debt tab to pay off, after all.
“The Good News Is, the Clock Hasn’t Struck Midnight on April 10th Yet.
“There Is Still Time to Act Before the Blackout.”
That’s all hogwash.
The change that’s coming on April 10 is that brokers and investment advisers will have to act in investors’ best interest when providing advice or, as is probably most common in these relationships, recommending a portfolio allocation or a particular mutual fund or similar investment. This is referred to as the “fiduciary rule,” and the big change is really that brokers will have to act in your best interest, not just offer reasonable products — which sounds like splitting hairs (is this fund the best one for you, or just a reasonable one that’s not inappropriate for you?) but is a substantial change, because many mutual funds are sold with front-end loads that are used to pay commissions to brokers who sell the funds. Some of those mutual funds are great, and for some investors the commission is a reasonable way to pay someone who is giving you good advice about where to put your money and how to manage your accounts… but some of those mutual funds are also expensive junk, and some brokers are selling only the highest-commission funds to their most uninformed customers.
Does that mean that the fiduciary rule will destroy the fund industry? Or that the government’s general push to make access to standardized or “robo” advice that’s cheaper than commission-fed advisers will mean that some investors are deprived of the personal attention of a financial adviser?
That’s not really clear yet, this change is certainly shaking up the industry but it will be a long time before we know whether, on balance, it was good or bad for more small investors. My guess is that it will end up being good, but that it could hurt some less-financially-savvy people who need someone to talk to but don’t have enough money or inclination to seek out a fee-only adviser, since those advisers and brokers may not be out hunting for and recruiting new small-money IRA clients if they can’t expect a solid commission income from them in future years… we’ll see.
You can certainly read plenty of opinions and predictions about the changed fiduciary rules on any financial website — mutual fund companies and financial advisers are the main advertisers on CNBC and Money Magazine and in many of the websites we all traipse by from time to time, and any threats to the livelihood of those money managers certainly get ample coverage in the financial press.
But yes, Keith Fitz-Gerald appears to just be recommending a variety of mutual funds, both open and closed-end (and probably some ETFs, too, though he doesn’t say as much), and he’s trying to scare you into buying in before April 10… because every newsletter promotion needs a fear factor or an imagined near-term catalyst. Without a deadline, you’re not going to subscribe right away… and if you don’t subscribe right away, and walk away and decide to think about it or research it for yourself, well, the odds of you buying a subscription to Money Map Report based on this pitch probably drop sharply the longer you get to think about it.
That bit about “The Wall Street Journal is reporting it ‘could cost American savers $80 billion.'” in the ad comes from an opinion piece in the Wall Street Journal from when these rules were first being proposed — it quotes a report that was funded by an investment manager that “the cost of depriving clients of personalized human advice during a future market correction—merely one of the many costs not considered by the Labor Department—could be as much as $80 billion.”
That’s not the same as “reporting,” of course. That’s an opinion piece by someone critical of the new fiduciary standard.
How about that “CNBC warns this ‘will force major change’ on American retirement planning” bit? That’s probably a quote from an article or segment from CNBC, but CNBC also put out a detailed article entitled “New investment rule could save investors billions” last year. Major change is certainly hitting the investment management and retirement planning industry in the US with this rule, but they’ve had time to prepare for it and it will take time to see what the unintended consequences might be.
Perhaps Fitz-Gerald is speculating that small investors will be unable to get into better mutual funds if they aren’t told by their adviser to buy the overpriced up-front-commission versions of those funds, and that mutual fund companies may stop selling to small investors if they can’t distribute those funds as easily through investment adviser networks by using front-end load “commissions”… but that seems unlikely to me to bring an end to good mutual funds or decent access to those funds by investors who can come up with a couple hundred dollars a month to put away.
The people who are not savvy enough to seek out relatively strong mutual funds or be critical consumers of stuff that’s sold to them on commission are probably not the same people who buy investment newsletters or pour their leisure time into reading articles like this one. There will always be people who will manage money for you, even if it’s a relatively small amount of money to start, and as long as there’s competition and a level playing field the costs of that management should go down over time.
And most of us start out making mistakes, but just paying attention in those early years can help you to learn from your mistakes — I didn’t know anything about investing when I was in my early 20s and got a small windfall as a gift, and the stock market seemed completely foreign and inaccessible to me so I didn’t realize you could research mutual funds on your own… and I ended up paying one of those 5.75% commissions/loads on a small purchase of below-average mutual funds from a guy behind the desk at my bank. But seeing that money taken out in my statements, and following those investments to see what happened, spurred me to pay attention and learn more, and I did… doing something dumb when you’re 23 is a great opportunity for learning.
Which funds is Fitz-Gerald actually recommending? I have no idea. He does tease a few of them, but I don’t know that there’s any reason to believe that his mutual funds are dramatically better than others for folks who aim to be long-term wealth compounders. Go to Morningstar.com">Morningstar and check out their favored funds, weed out the most expensive ones, and you’ll likely be able to find a good list for yourself.
If you do want some ideas to get you started, Barron’s did a cover story on some of the better actively managed mutual funds a week or two ago, with the argument that in a softer market active management is likely to outperform index funds — the funds they pick are all “value” funds that did poorly in 2015 and very well in 2016, their list is:
AllianzGI NFJ Dividend Value (PNEAX)
DFA US Large Cap Value (DFLVX)
Dodge & Cox Stock (DODGX)
GoodHaven (GOODX)
Sound Shore (SSHFX)
T. Rowe Price Equity Income (PRFDX)
Vanguard U.S. Value (VUVLX)
And I personally have some money invested in actively managed mutual funds, including Dodge & Cox Stock (DODGX), PrimeCap Odyssey Growth (POGRX), DoubleLine Shiller Enhanced CAPE (DSEEX)… and I’ll probably invest in others in the future. There are still quite a few very sold mutual funds, with below-average annual expenses and strong and consistent long-term records, but none of them are going to get you rich very quickly (the mutual funds that do have fantastic short-term results are generally those that are less diversified — which sometimes causes huge problems, as with Sequoia (SEQUX), a fund I had money in for a long time, allowing Valeant (VRX) to become more than 20% of the fund before VRX shares crashed during the accounting and pricing scandals… or, more prosaically, with funds like Ken Heebner’s CGM Focus Fund (CGMFX) that was everyone’s favorite in 2007 and 2008 as it soared on the strength of a few favored stocks in the highly concentrated 25-stock portfolio, but has dramatically underperformed the market in the eight years since then.)
But you don’t need a newsletter to pick a few solid mutual funds for you. Look for long management tenure, below average expense ratios, low turnover if you’re using a taxable account, and returns that are better than the market over the long term, and during the time that the current manager has been running the fund. People don’t beat the market by dramatic amounts by investing in mutual funds, but the best mutual funds can do a little better than the market for very long periods of time, and they can help to avoid some pitfalls and soften market crashes for you by diversifying or being judicious with cash balances… and, perhaps most importantly, they are a disciplined way to build a portfolio without watching the balance every second or becoming tempted to trade in and out of your stocks or sector ETFs whenever you feel the wind blowing in a different direction.
Most of us need to diversify away from our own market sentiments with a substantial chunk of our money; most of us would do better with a steady dollar-cost-averaging investment strategy that includes saving more money than you’re saving now, and putting it into a diversified set of mutual funds, either index funds or good actively managed funds; and most of us should do more saving and investing and less trading. Those are all reasonable things, and (good) mutual funds are a good way to gradually build up investment portfolios at $100 or $500 a month, because that’s what they’re designed for… and for almost all of us who are actively engaged in our finances, I’d argue that the likelihood is that April 10 will make no real difference at all.
So there’s your 26(f). Mutual Funds. And if you want to build up a huge portfolio, be prepared to save more, invest more into those funds, and let those investments compound for decades. It works, but there’s no magic to it and there’s no “blackout” coming in April. If folks are really interested I can sift through the clues in the ad and try to name a few of the actual funds Fitz-Gerald is recommending, but I expect there will be a lot of the same ones that Morningstar and Barron’s and the financial media in general approve of — lower fees, longer-term managers, relatively small initial investment requirements for small investors starting out, and relatively strong performance. Or, better yet, YOU can tell us which mutual funds you think are worth the money — just share your thoughts with a comment below.
And, as always, we’d like to know what you think about the newsletters you’ve subscribed to — if you’ve subscribed to Money Map Report, please click here to share your opinion with your fellow investors. Thank you!
Thank you, Travis Johnson on the Jan 20,2016 article debunking the Fritz-Gerald SCAM. I loved the way you exposed his alarmist examples. My father was always frugal most of his life, but even when finances were tight, he always put a small amount away regularly by investing in several funds and buying UTX stock through Pratt & Whitney where he worked. When he died at age 70, he had a nice nest egg to provide much needed care for my mother during the last 10 years of her life. My siblings and I were quite surprised by the inheritance he left us. We have all followed my father’s investing strategy which is what you advocate.
Thanks for confirming what I felt when reading Fitz-Gerald’s article “If it sounds too good to be true, it probably is.”
The “program” seems to be a take on the “bank on yourself” idea.
Essentially, “bank on yourself” uses a specific type of whole life policy, and one must be very careful to set it up. not all whole life policies qualify.
1. Arrange for the “specific” policy (i do not know the precise name, but a company should know which policies let you borrow against ‘cash value’, without a reduction in the ‘cash value’)
Try googling: which “whole life” policies let you borrow against “cash value”
2. Take the payments into the policy; a combination of significant coverage, and ‘cash value’ element.
3. when you have cash value of a value to allow you to purchase something you would otherwise get a loan for, simply “borrow” (important term) from your cash value. DO NOT ask for a ‘withdrawal’ or ‘surrender’. the insurance company loans you the money, but your ‘cash value’ does not decline immediately. that means it will continue to earn growth at the gauranteed rate, as if you still had all the ‘cash value’ remaining (which is very different from regular whole life policies).
4. figure out a re-payment plan (ask a lender what they would charge, and use the re-payment schedule as your plan)
5. Instead of buying “on credit”, and making payments to a credit card or bank loan, you make payments into your own ‘cash value’.
so what is the benefit? a loan invisible to the credit reporting companies; a loan where you not only have the item you purchased, but also the money you spent on it in the first place; a loan you are never required to payback*; a whole life policy (which may or may not be something you want).
once you completely repay your private loan, you have your entire cash value (increased per rate guarantee), available to ‘borrow’ again.
*note: if you choose not to payback the loan, interest charges will still accumulate. it is possible to have those charges exceed your cash value, ending the policy entirely.
My stockbroker checked into this! Thinks it is a big scam!
LOTS of verbiage but no CLEAR INSTRUCTIONS ON what TO DO AND WITH WHOM!!!!!!!!!!!!!!!!!!!!
This is a great read and here are the recommended programs by Fitz-gerald.
26(f) Opportunity #1:
This Virtual Reality Leader Outperforms Its Holdings by as Much as 237%
How to Buy:
Name: Red Oak Technology Select Fund
Ticker: ROGSX
Note: To open a position, simply contact your broker or use your online brokerage account. To open a position directly with this fund, visit the fund’s website here.
Red Oak Technology Select Fund (ROGSX) is a $175 million 26(f) fund that invests primarily in technology companies pioneering new products for computers, semiconductors, and other electronics.
And in good 26(f) fashion, it gives investors a way to play some of the most exciting tech companies in the world – and frequently bag profits that exceed them.
For example, over the last five years ROGSX has delivered profits to investors that were 237% greater than what Oracle, one of its top holdings, managed in the same time frame. Another of ROGSX’s main holdings, Intel, has managed to return 50% over the last five years – and ROGSX still outperformed by 138%.
The 26(f) program’s biggest holding, NVDA, is a microchip manufacturer that’s fast-positioning itself to be a leader in the unfolding virtual reality revolution that Mark Zuckerberg and so many other tech leaders are pouring billions into. NVDA stock is up more than 500% in the last five years, validating ROGSX management’s decision to pursue the sector, and positioning the program as a great way to play the VR boom.
Thanks to winners like NVDA, this 26(f) program has thrashed the Dow by more than 2-to-1 during one of the most storied bull markets of history.
ROGSX turned every $10,000 invested in February 2009 into more than $44,000 – and this outperformance shows no sign of slowing down.
In fact, the fund’s hot streak is accelerating. Year-to-date, this 26(f) program has returned more than 29%, which handily beats its 10-year average of 12.13%.
Of course, 12.13% as an average annual return is nothing to sneeze at – in fact, it’s about a 50% beat for the historical returns of the overall stock market. So even this 26(f) fund’s traditional average annual gain amounted to extremely healthy profits for investors.
But there’s one big reason ROGSX’s returns may be about to reach a whole new level.
With tech being the brightest spot in America’s economy, the biggest profits will belong to that sector – and ROGSX is the perfect vehicle for savvy investors to take more than their fair share of profits from it.
26(f) Opportunity #2:
The Energy Giant Crushing the Industry 10-to-1
How to Buy:
Name: Fidelity Select Envir and Alt Engy Port
Ticker: FSLEX
Note: To open a position, simply contact your broker or use your online brokerage account.
If there are two areas where President-elect Trump is determined to spend money, they’re energy and infrastructure.
And that’s why Fidelity Select Envir and Alt Engy Port (FSLEX) is such an urgent opportunity today.
The program counts Honeywell International Inc. (NYSE:HON) as its biggest holding, with an 8.65% stake.
This is important because Honeywell, a company that specializes in the development and enhancement of energy efficient products and technologies, has strongly outperformed not just the energy industry but also the broader markets.
Honeywell is currently up double-digits for the year. Long-term, the energy company has been a star as well, beating the Dow’s returns by roughly 2-to-1.
By channeling the returns of HON, the FSLEX 26(f) program has even beaten the energy giant Exxon’s returns by a stunning 428% over the last five years. It also left Chevron in the dust, beating the company’s gains by 287%.
Going ahead, HON’s presence in this 26(f) program will be vital to allowing investors to crush the broader energy sector’s returns.
The company, after all, has just won a $900 million, five-year contract from the National Nuclear Security Administration to help maintain America’s nuclear capabilities, which will be an extremely important catalyst to propel the stock forward in the next few months.
Meanwhile, plenty of the program’s other holdings show promise. Deere & Co. (NYSE:DE), for example, has strong upside as President-elect Trump plans to pour as much as $100 billion a month into rebuilding America’s infrastructure. Just as Honeywell has solidly beaten the entire energy industry, Deere has been a standout among construction companies, beating Caterpillar’s returns by more than 3-to-1 over the last five years.
And sure enough, FSLEX has allowed investors to tap into Deere’s profit potential while also surpassing it. Over the last five years, for example, FSLEX’s returns have beaten Deere’s by 31%.
With infrastructure plays like Deere about to enter a new era of presidentially-mandated spending booms, this one 26(f) program gives you a chance to make a killing.
26(f) Opportunity #3:
Tap Into a $4 Trillion Revolution by Playing This E-commerce Juggernaut
How to Buy:
Name: T. Rowe Price Blue Chip Growth
Ticker: TRBCX
Note: To open a position, simply contact your broker or use your online brokerage account.
Amazon.com Inc. (NasdaqGS:AMZN) stock has appreciated more than 1,900% over the last decade. In 2015 it doubled in value, and for 2016 it’s solidly up double-digits to date.
Of course, the e-commerce king has gotten pricey from its historic run, and a share of Amazon now costs $770 as I write. Naturally, this has left millions of investors looking for a “backdoor” entry to Amazon that doesn’t force them to choose between buying 100 shares or a house.
Enter T. Rowe Price Blue Chip Growth (TRBCX), the 26(f) program I’ve uncovered that lets you profit from Amazon for as little as $72 a share.
Amazon is TRBCX’s largest holding, with an 8.97% stake that’s almost twice the size of its next largest holding, Facebook.
As if that weren’t enough, this 26(f) program has a 2.13% stake in Alibaba, which is China’s largest e-commerce company. Alibaba has managed to grow revenues at more than 54% year-over-year, and is poised to be an enormous growth stock down the road.
And the best part? The 26(f) fund doesn’t need Alibaba or any other holding to go off on a tear in order to reward investors extremely well. After all, Alibaba hasn’t returned triple-digit profits since its IPO more than two years ago, but TRBCX was able to beat Alibaba’s performance by 215%.
Thanks to its ability to tap powerful growth stocks and even post returns exceeding them, TRBCX has beaten the Dow by 45% over the last five years – during one of the most celebrated bull markets of history.
Best of all, the forces pushing Amazon and Alibaba stock to new record prices – specifically, the booming global e-commerce revolution – are just getting started. eMarketer forecasts the global market for e-commerce to reach $4 trillion by 2020, providing huge tailwinds for the two most important e-commerce players.
With TRBCX’s ability to channel both companies, it’s perfectly positioned to keep pushing investors’ wealth to new heights.
26(f) Opportunity #4:
600% Peak Gains – With Even More Massive Potential Ahead
How to Buy:
Name: Fidelity Select Transportation Port
Ticker: FSAIX
Note: To open a position, simply contact your broker or use your online brokerage account. $25 minimum investment using an IRA.
President-elect Trump vows to deregulate the oil and gas industry – and bring about America’s energy independence by unlocking the United States’ vast oil reserves. Meanwhile, nearly $1 trillion worth of shale deposits has been found in West Texas – 3x larger than the Bakken shale discovery. And with all the new supply coming into the market, oil prices show no sign of returning anywhere near the $80-$100/barrel price range they held just two year ago.
All this points to one thing: an era of cheap fuel.
This presents challenges to some sectors and massive boons to others. But there’s one standout winner that most investors wouldn’t think of immediately – the airline industry.
U.S. airliners have been defying the earnings recession that’s crimped other S&P 500 companies’ profits because their fuel costs are among their biggest costs of operations.
It’s been an absolute bonanza for the industry. Delta Airlines Inc. (NYSE:DAL) stock is up 470% in five years. American Airlines Group Inc. (NasdaqGS:AAL) stock has seen 678% gains in the same time frame. Southwest Airlines Co. (NYSE:LUV) stock is up 467%, and Alaska Air Group Inc. (NYSE:ALK) is up 365%. Even Spirit Aerosystems Holdings (NYSE:SPR), one of the weaker industry players, is still up more than 222% in the last five years – enough to more than triple investors’ money.
The industry is so white-hot, I knew I had to find a 26(f) program to help investors tap into the growth.
Sure enough, Fidelity Select Transportation Port (FSAIX) gives investors a chance to profit from every last one of the triple-digit winners I’ve mentioned above – and even surpass them.
In fact, FSAIX has already returned 600% peak gains for investors. That’s good enough to turn every $10,000 invested into $70,000.
And with the industry only getting stronger, the profits from this 26f program will soar right along with it.
26(f) Opportunity #5:
Your Backdoor Entry to the Hottest Private Companies on the Planet… Pre-IPO
How to Buy:
Name: Fidelity Contrafund
Ticker: FCNTX
Note: To open a position, simply contact your broker or use your online brokerage account. Minimum investment of just $25 through an IRA.
Fidelity Contrafund (FCNTX) is a $100 billion 26(f) program that has scooped up a claim in some of the hottest, pre-IPO startups in the world today.
As one of the equity funds that owned Facebook shares before its 2012 IPO, it was in a position to make a killing. And the fund has only ramped up its private investments since.
It’s moved decisively to corner the cream of the unicorn crop, with stakes in Pinterest’s $11 billion valuation, in Uber’s $66 billion valuation, Airbnb’s $30 billion valuation, Dropbox’s $10 billion valuation, and even Elon Musk’s Space X valuation of $15 billion.
This basket of pre-IPO companies is extremely exciting because of the vast profit potential that could come from any single one.
For example, back in May of 2005, Facebook was valued at $100 million.
By January of 2008… $15 billion.
January of 2011… that number hit $50 billion.
That’s a rise of 49.900%.
It would eventually turn every $500 of pre-IPO investors’ money into well over $500,000.
All told, Fidelity Contrafund is one of the more aggressive funds for pre-IPO investing with nearly $1 billion in these companies. So it’s your best bet in securing a slice of an enormous private equity pie.
Since its inception, the fund has returned more than 1,390% – enough to turn every $10,000 of initial investors’ money into $149,600.
When these IPOs hit, I can’t wait to see how FCNTX is rewarded for its holdings – and rewards investors who were savvy enough to grab pre-IPO pieces of the action through this backdoor investment.
26(f) Opportunity #6:
This Program Could Pad Your Retirement with an Extra $68,870
How to Buy:
Name: Vanguard Wellington Inv
Ticker: VWELX
Note: To open a position, simply contact your broker or use your online brokerage account. However, your broker will need to have a prior relationship with the fund. Find out if your broker is eligible here.
Most investors think they have to choose between income and capital appreciation when they pick a stock.
But my favorite 26(f) Program, Vanguard Wellington Inv (VWELX), does both.
It delivers a steady stream of income with a dividend that’s 19% stronger than the average S&P 500 company’s yield, and has also never missed a quarterly dividend going back as far as 1980.
And it’s shown anyone following along with my Money Map Report recommendation the opportunity to score $68,870 in profits. This stream of income has been incredibly beneficial for long-term investors, but there’s an even more important selling point to consider.
The gains have been so powerful that every $10,000 invested in VWELX at its inception turned into well over $9.8 million today – again, not counting the generous checks in the mail each quarter.
Its biggest holdings include companies include some extremely strong performers, such as Wells Fargo & Co. (NYSE:WFC), up 120% over the last five years, and JPMorgan Chase & Co. (NYSE:JPM) and Comcast Corp. (Nasdaq:CMCSA), up 163% and 197% in the last five years.
With quality companies like these, broad diversification (its biggest position is still just a 2.08% stake) and a proven record of delivering persistent market outperformance, I’ve taken to referring to this particular 26(f) program as “my desert island fund.”
The reason why is simple. It’s the one investment I would choose if I had to put all my eggs in one basket before a multi-decade exile. Over time, the capital appreciation alone would be phenomenal if it’s anything close to VWELX’s historical performance – and that makes it the perfect candidate to potentially secure your retirement.
You can invest in VWELX through commonly used brokerage firms like ETrade, Scottrade, T. Rowe Price, and TD Ameritrade, just to name a few options. You also have the option of opening an account with VWELX directly by clicking here.
26(f) Opportunity #7:
The “Blue Chip Hall of Famer”
How to Buy:
Name: Fidelity Select oftware & IT Svcs Port
Ticker: FCSCSX
Note: To open a position, simply contact your broker or use your online brokerage account. Minimum $25 investment when using an IRA.
There’s something I love about my “Blue Chip Hall of Famer” 26(f) program right off the bat – its top five holdings have proven to be serious winners in both the short and long term.
Since its inception in 1985, Fidelity Select Software & IT Svcs Port (FSCSX) has made a point to include famous, household names in its portfolio – and it’s gone after famous brands with great success.
Its five biggest holdings – Facebook, Alphabet Inc. C, Microsoft, Alphabet Inc. A, and Visa – have all more than doubled in the last five years. Throw in the fact that these five stocks make up a whopping 45.12% of the program’s assets under management, and it’s clear that this is a 26(f) fund that knows how to pick winners.
Shares of FSCSX have been available for purchase for as little as $101 this year – making it a much cheaper alternative to gain exposure to Alphabet than it would be to buy shares of Alphabet itself, which is priced north of $780/share as I type.
With its strong winning streak, FSCSX has been able to notch gains of 1,236% since its creation in the mid-1980s – enough to turn every $10,000 invested into $133,600.
In fact, its five-year average return is 18.42% – less than a point shy of the fabled Berkshire Hathaway’s average annual return. And as FSCSX harnesses the best growth opportunities in blue chips and tech giants, I expect its returns to keep on accelerating for investors.
26(f) Opportunity #8:
The Most Promising 26(f) Program for Income Investors Yet
How to Buy:
Name: American Century Income Fund A Class
Ticker: TWEAX
Note: To open a position, simply contact your broker or use your online brokerage account. No minimum investment through an IRA.
American Century Income Fund A Class (TWEAX) is a $10.72 billion 26(f) fund that prioritizes income: capital appreciation is a secondary objective. This leads it to invest its assets under management in dividend-paying companies like Schlumberger, Pfizer, Wells Fargo, and Cisco.
This 26(f) program allows investors to tap into the kind of rising income stream that most people think is reserved for Dividend Aristocrats – i.e. companies with a multi-decade streak of increased, regular dividends like McDonald’s or Coca Cola.
In its entire history, the program has never missed a quarterly dividend payout – not even during the financial crisis of 2008, which knocked 10 former Dividend Aristocrats out of the exclusive club.
In fact, TWEAX not only kept up its regular payouts during the height of the financial crisis – it also made the rare move of issuing two back-to-back dividend payouts to reward level-headed investors who didn’t panic.
These back-to-back dividends, issued just two days apart from one another, amounted to a 3.4% yield for the year – not counting the other three quarterly payouts of 2008.
Not a bad show of confidence… considering the average S&P 500 company can only be bothered to offer a 2.09% yield during boom times!
Accounting for these payouts, the fund has managed a 13.54% average yearly return over the last five years. Even better, its returns seem to be accelerating, as the fund has managed a superior return for 2016 year-to-date. The acceleration in returns is made possible thanks in large part to the steadily rising dividend payouts of companies it allows investors to profit from as a 26(f) program.
TWEAX is up 30.8% over the last five years, which is solid performance considering it doesn’t account for the quarterly checks it sends investors. Even for a 26(f) program that doesn’t prioritize capital appreciation, it still allows investors to outperform many of its holdings; it’s beaten Exxon’s returns by 212% over the last five years, for example.
26(f) Opportunity #9:
Your Backdoor to Emerging Economies
How to Buy:
Name: Fidelity Diversified International
Ticker: FDIVX
Note: To open a position, simply contact your broker or use your online brokerage account. $25 minimum investment through an IRA.
There’s a reason that 65% of S&P 500 earnings companies’ profits come from abroad.
Simply put, most emerging economies are growing much faster than the 1.9% growth the U.S. economy reported in 2015. China, for all the hand-wringing about its economic “slowdown” still posted 6.7% growth last year. India’s economy has even grown by 7.3% over the last 12 months.
Sure enough, the much over-hyped global slowdown hasn’t stopped Fidelity Diversified International (FDIVX) from posting a 35% gain over the last five years even as the BRICs – Brazil, Russia, India, and China – reportedly imploded.
The program’s three-year performance is even more impressive, at 14.5% average annual returns. Tellingly, FDIVX has beaten the MSCI EAFE index, which tracks stocks of large foreign companies in advanced countries, each year over the last decade.
The fund also invests around 12% of assets under management in U.S. companies, so it captures upside at home as well.
FDIVX counts some major winners among the top 10 holdings of its portfolio, including Keyence Corp. (OTC:KYCCF) which has more than tripled investors’ money over the last five years as I write, beating the Dow’s returns by 4-to-1 for comparison.
When commodity prices rebound, so will the BRICs – and investors who bought in on their weakness through a nimble fund like FDIVX will be very glad they did.
26(f) Opportunity #10:
This Small-Cap Fund’s Been Known to Pay a 22% Yield
How to Buy:
Name: T. Rowe Price Small-Cap Value Fund
Ticker: PRSVX
Note: To open a position, simply contact your broker or use your online brokerage account. $10 minimum investment through an IRA.
T. Rowe Price Small-Cap Value Fund (PRSVX) is a 26(f) fund that emphasizes small-caps, so it normally invests 80% of its $7.67 billion in assets under management into companies that are at or below the threshold for the Russell 2000 Index.
Small-caps command tremendous upside. Year after year, the biggest returns in the stock market have belonged to the small-cap sector – but picking the winners in advance isn’t always easy.
That’s why I so strongly recommend a fund like PRSVX. Its top 10 holdings make up just 10.05% of its portfolio. And besides, the 26(f) isn’t in the business of picking losers, with even its oil and gas small-cap play, One Gas Inc. (NYSE:OGS) posting an 85% gain over the last five years despite the broader energy sector’s problems.
PRSVX has multiplied investors’ money over the last decade thanks in large part to the lavish dividends it typically pays investors at the end of each year.
For example, in mid-December 2015, the 26(f) program paid out an $8.19/share dividend, which amounted to a yield of 22% – mouth-watering considering it’s roughly 10 times what the average S&P 500 company pays.
And the generosity isn’t an aberration, either. In 2014, the company paid a juicy 7% dividend, and it’s almost always thrashed the yields that can be found among more famous dividend plays.
These payouts have gone up steadily since 2009, making PRSVX a tempting income play in addition to the superior capital appreciation it’s historically managed against the overall stock market.
Thanks for the great explanation !! I went partway through the Fitz-Gerald presentation (like I have some others) and then sent out an inquiry trying to find out what a 26(f) plan was. Found it was mostly fear, bullshit and misrepresentations. You can get GOOD advice from any of the financial publications. It goes like this: Buy some solid mutual funds, keep adding to them over the years and diversify. You will do well.
The whole 26(f) thing is a scam of magnificent proportions. I am surprised that our government has not cracked down on it. That is another story though.
We all work hard for our money and not spending some time taking care of it is silly. Individual investors do better than “advisors”. There is no magic sauce out there – investing is a long term systematic process that requires knowledge, will, and patience and above all TIME and HARD WORK.
The “advisors” are there to make money and that is your money in their pockets.
Thanks for this, I thought I was missing out on something for the last 50 years. Turns out it’s just what I have been doing for that time.
Thanks for your efforts on this. Hopefully this will make KEITH FITZ-GERALD and his ilk less likely to waste our time.
Thank you for this clear discussion. It proves what Barnum said about one being born every day.
thank you, I needed to read this
Thank you.
How I wish I’d read this before spending $79 on the 26(f) publication. KF-G never explains what is so special about 26fs and recommends funds that have stocks we all know about eg. NVDA, BABA etc. And yes, Barrons recommends the ETFs
highly. Please let us know your thoughts on MMap’s Zenith service (recommends buying puts of companies that (might?) fail. To be honest MMap does recommend many stocks that have done extremely well before they move way up.
Did you buy any funds via Keith’s recommendations? If so, can you share how you did it?
Any chance you can share a copy of the report that you purchased? I am interested in getting into some of the recommended funds. Just want to know if any special wording is required during sign-up. Thank you! Rudy
Need to invest in the 26f program. Please send me information on how to start before April 10, 2017.
I do subscribe to Money Map Report, his recommendations are average, some up some down, I buy the recommendations very selectively; however his colleague Michael Robinson’s news letter ‘Nova X Report’ has done a lot better. Read ‘Hubert Financial’ for guidance of the best rated Financial News Letters. Remember the only magic formula for financial success is frugality in life style and perseverance and consistence in investing.
Thanks for the feedback — unfortunately, Marketplace has largely shut down Hulbert’s Financial Digest, though it looks like he has restarted it on his own with a smaller universe of coverage.
Aspi I applaud you deeply in your very accurate words of financial success.I’m my own proof that while making a decent salary but saving and investing in different tools such as real estate, mutual funds and individual stocks one can achieve great financial success.All it takes is as you stated frugality, discipline, consistency and time.There are no secrets or shorts to financial success.
It’s a scam nothing happens April 10
How do you know its a scam? What’s your source, please?
Did you read the article above, or just join in the discussion!!
I also would like to invest in 26f programs! HOW?
I WANT TO INVEST IN THE 26F PROGRAM BEFORE IT IS TO LATE
Did you even bother to read the article.If not ,read it and pay close attention to what it’s telling you.
My last posting was for William, Cynthia and Walter.
How do I get a (26f) program?
To those last few posters: You might look around for a rat hole and start tossing some money down it.
THANKS VERY MUCH FOR YOUR RIVITING EXPOSE’ OF FITZ-GERALD’S “26(F) PROGRAMS” PITCH.
I am always amazed in your ability to ferret out the essence of these (usually) get rich quick promotions and getting past the ingenuity of the promoters.
If it is a video, with no controls to skip around or to the end, then it is 99% likely to be a scam. Ive seen this many times.
Is this 26f program legit. Or is it junk?
Junk…simply look for good mutual funds
How about investments into gold and silver…and marijuana?
A Friend with Weed, is a Friend indeed.
Ive been looking for a good marijunia fund or stock. Do u know a good one
Just one more example for why I value the efforts of the tireless Gumshoe! Saved me endless hours of meaningless Googling all over the place, looking for those illusory haystack needles!
Thanks mucho!