Valentine's Day

Happy Valentine’s Day! I read today that Saudi Arabia pretty well bans Valentine’s Day by asking florists and gift shops to remove all red items in the days just leading up to February 14. Apparently the Saudis believe St. Valentine’s Day encourages immoral relations between unmarried men and women. Every year the Commission for the Promotion of Virtue and Prevention of Vice cracks down by raiding stores and removing offensive items. Saudi Arabia follows a strict interpretation of Islam called Wahhabism.

The story is a bit different here in the United States. Despite the crushing recession, Valentine’s Day spending is expected to rise 3.3% to $17.6 billion. We spend on flowers, greeting cards, candy, clothing, jewelry, romantic getaways and dining out.

Speaking of spending money, the online site kaChing asserts that investors pay 3.37% of assets per year for stock mutual funds. This is rather astonishing, given that the Investment Company Institute (ICI) suggests that the same mutual funds costs are 1.17%.

So, how does kaChing come up with its number? kaChing adds 0.94% for taxes and 0.2% for trading costs. Further kaChing averages the costs of each fund on the market, treating each of them as equals. The ICI weights each fund by the amount of assets it holds. Since large mutual funds tend to have lower expenses, the ICI’s method lowers the average.

Now let’s talk about kaChing. This web site allows members to invest by making trades that follow those made by “truly skilled investors we call Geniuses.” Members select a “genius” they wish to follow. They may follow their genius for free and make their own trades or, for a modest management fee, they may have Genius make the trades in their personal brokerage account. The fee is split between kaChing and the “genius.” These fees range from 0.25% to 3.00%.

These so-called geniuses all pursue active management strategies. You probably already know how I feel about active management.