The newest complaint against mutual funds is not that their fees are too high or that they don't beat the indexes often enough. It's that they are boring.
This brings up a new demand in my experience, that a money-management vehicle keep us entertained while it transports us down the road to prosperity and a comfortable old age. I realise that even buses have television these days, but where does it all end?
Fussing about boredom subverts the whole idea of holding fund shares patiently. When you try for faster gratification in investing, you often wind up with less.
Mutual funds were designed to work best over periods of five or 10 years, or beyond. But as ennui mounts and attention spans grow shorter, the average investor isn't sticking around that long any more.
Meanwhile, the fund industry seems intent at times on undermining its own buy-and-hold ethic. Look at all those new funds, and all the rapid turnover of investments by the fund managers themselves. "True buy-and-hold investors seem rare these days as everybody tries to stay ahead of the market," says Paul Merriman, a Seattle adviser and money manager who publishes the newsletter FundAdvice.
In the 1950s and '60s, fund investors redeemed, or cashed in about 7% of their shares a year, says Jack Bogle, the founder and retired chairman of the Vanguard Group, the second-largest fund firm with $551bn in assets. That meant the average holding period was roughly 14 years.
In 1999 and early 2000, Bogle says, if you include money switched from one fund to another within the same firm, the redemption rate has soared to the 40-50% range. That collapses the holding period to between two and 2.5 years.
Even if you don't count exchanges, according to the Investment Company Institute, redemptions reached 21.7% in 1999, the highest on record except for the market-crash year of 1987, when the rate hit 26.5%.
"This sea of change in the character of fund owners violates the most fundamental principle of investment success - invest for the long pull,'' Bogle says.
Now, a part of this increased activity makes sense. If you've held a fund for 14 years in today's world, you picked it out before the birth of the internet and the whole high-tech boom of the 1990s. Some funds have adapted well to all these events, but many others haven't.
You'd expect investors to get more active as they learned more about the game. "Investors have mobilised to seek the best returns," said Michael Porter, a Harvard Business School professor, speaking at an ICI convention in May. But jumping around a lot is self-defeating.
Each move can ring up redemption fees from the old fund and sales loads at the new one.
Even if you manoeuvre among no-load funds without incurring transaction costs, there may be taxes to be paid.
And even if you make your moves within a tax-deferred retirement setup such as an individual retirement account or an employer-sponsored plan, you run the considerable risk of outsmarting yourself.
"Rapidly jumping from one fund to another is not a formula for investment success," says Bogle.
Want proof? Ask somebody who poured money into an internet fund early this year, just before the whole group took a dive. Several internet funds have dropped 25% to 35% over the last three months.
"If you want to follow fads, you'll find plenty of them in investing,'' Merriman says.
Before high-tech, says Mark Riepe, director of Charles Schwab & Co.'s research centre, there were gold funds, which rose 33% a year in 1976-80, but have lost 3.7% a year since; and Japanese stock funds, which climbed at a 46% annual rate in 1984-88 but lost 0.5% annually over the ensuing 11 years.
The performance chase, all in all, is a poor antidote to boredom. Losing money can get monotonous too.
Chet Currier in the Bloomberg New York newsroom