Funny money

Money mags advise consumers to look at the long term but give advice that suggests fast, furious short-term buying and selling is the way to go.

By James Poniewozik

Published March 4, 1998 8:00PM (EST)

With the S&P 500 into four digits and the Dow closing in on five, with the Consumer Confidence Index evincing such thumbs-under-the-bracers smugness that it might as well be called the Consumer Arrogance Index, you'd think money magazines would be the philosopher-kings of the newsstand. Money, after all, is the new politics -- the new sex, the new sports and the new Lambada besides -- and John Q. Public-Offering now devotes the kind of trust and respect to Peter Lynch and Warren Buffett he used to give to pastors and baseball players. Sometime this decade, as the lack of fallout from the Clinton-Lewinsky scandal shows, average Americans realized they could not serve both God and Mammon, gave God their two weeks' notice and moved on.

Money magazines could capitalize on this shift much like rock magazines did in the early '70s, expanding from their narrow interest base to comment broadly on the emerging culture. So how are they seizing the day? The examples are endless. Today you can pick up a money magazine and read a cover story on the best mutual funds to buy. Or you can discover which are the best mutual funds to purchase. The truly hard-core can even read lists of the best mutual funds to invest in. I have a half dozen March money magazines in my lap, and only one has a cover without a story on buying mutual funds. It has one about buying stocks.

Given the record bull market and a readership clamoring for its taste, joining the fund-picking derby is probably unavoidable for money magazines. (The mags prefer to call themselves "personal finance magazines"; I have "money" -- grubby 20s and a smudged checkbook -- and if it ever reaches such a level of abstraction that it becomes "finance," I'm not entrusting it to a $2.95 monthly with a crystal ball on the cover.)

But it also embraces a big contradiction. The reason mutual funds are so popular among commoners -- besides employers' bagging private pension plans in the face of their retirees' stubborn refusal to die at age 67 -- is simplicity. A speech therapist or steamfitter should be able to choose a portfolio from a few basic models, adjust it over the long term, but otherwise leave it alone without worrying about the peregrinations of the transports or precious metals. Try to beat the market on your own, the reasoning goes, and you risk losing your wad to brokers' fees and poor choices.

And most money mags, to be fair, conscientiously provide just that advice. But they contradict it with every month's who's-hot-who's-not onslaught, encouraging readers to do exactly the same kind of armchair horse trading -- except with funds instead of stocks and bonds. The cold fact is that restrained, consistent investment is boring: You could put out the magazine of the buy-and-hold strategy about once every five years. Thus Smart Money, Kiplinger's Personal Finance, et al., work essentially like commissioned brokers, profiting from churn, thriving whenever you rejigger your portfolio (and turn to them for advice).

So if money magazines gained an audience thanks to the democratization of the market, which involved converting stocks and bonds into funds, they've contrived to keep it by turning funds back into stocks and bonds -- treating them as dependent on the derring-do of heroic agons and requiring constant, paranoid reassessment. The mutual fund industry has helped them, launching new products by the hundreds, but the magazines have amplified the effect by making fund managers into stars -- ur-manager Lynch is mentioned on the covers of Smart Money and Worth this month -- through personality-driven profiles like Money's six-pager on manager Tom Marsico, who left Janus funds after conflicts with management (this headstrong Denver bronc in shirtsleeves just rubbed those stuffed suits the wrong way!).

Sure, fund managers, with their mitts all over the world's trillions, are worth journalists' attention. But this star making paints a weird picture of the economy, one more about shrewd gambling and timing than the production of useful goods and services -- no wonder so many people consider the average share price of 30 steel and cereal makers a better economic indicator than whether they've had a raise in the last five years. Furthermore, these profiles, and the ceaseless annualized-return charts, implicitly push readers to "chase yield," repeatedly turning over their money to last year's top performer, precisely what the magazines' more sober advice tells them not to do.

For example, cheap and simple index funds have been praised over the last few years as the best low-maintenance choice for a lot of investors. But they get shafted in terms of sheer page count. Since their blessing and curse is competent consistency, they're never going to top the year-end roundups, much less create Lynch-grade superstars. How do you get 2,500 gripping words on a manager's prowess tracking the S&P 500? Where's the Joseph Campbellian quest narrative or Oedipal drama ("A young manager is polishing his father's record with category-whipping returns") in Vanguard's achievement of relatively low expense ratios?

It's not that fund assessments themselves can't be smart or entertaining -- Mutual Funds magazine, for example, is filled with industry analysis and acid, knowing barbs (it calls its worst-fund award "The Steadman," after its favorite punching bag, the Steadman fund family). It's just that I pity any 401(k) holder who feels the need to read this stuff 12 times a year.

Ironically, not only is there a practical alternative to this fund orgy, it's best exemplified by a title owned by Fidelity Investments' parent company. Worth is hardly free of bulldog-feeding stock-and-fund articles (its cover story features Lynch himself sounding out money managers on "14 Great Stocks to Buy Now"), but it supplements them with truly fascinating long analyses and essays on money's political and personal effects. Richard Todd writes a perceptive, funny piece on knee-jerk anti-tax sentiment, recalling how his lawyer justified working out a tax scheme that cost Todd as much in legal bills as the tax he was avoiding: "The assumption was that I would rather pay a fee to him than a tax to the government even if it worked out to be the same amount of money." Most of Worth's give-no-offense competitors would rather put a Sally Mann nude toddler on the cover than suggest that Washington's banditry might be a good thing. More typical is the jocular Freeman Nation pandering in Your Money, promising to keep your kids' "college accounts safe from Uncle Sam's grasp" (It's Your Money, dammit! Yours!). And whereas for most magazines, "personal finance" gets about as personal as reducing credit card debt, Worth's Alfred Gingold turns in a long, touching memoir on settling his late mother's estate. Every mag in this genre knows that money is important; puzzlingly, Worth is the only one acting as though it believes money is interesting.

True, consumers will always need basic advice on buying a car, choosing insurance and paying taxes, which all these titles handle pretty well -- Money and Smart Money give the new tax laws useful coverage this month. But only quality writing will give them added value over the Internet and cable-TV competitors that are making them conspicuously nervous. (Money's Ruth Simon protests too much that "the proliferation of investing advice everywhere -- from daily newspapers to the Internet -- isn't exactly pushing the nation's investing IQ into the stratosphere.") Yet, by constantly recycling the same tip sheets as "The 7 Deadly Sins of Investing" (Kiplinger's) and "The 10 Commandments of Funds" (Individual Investor), they ignore the only true advantage they have over the fleeter-footed media. It may pay off in the short run -- as long as the market's Candyland Express steers clear of Gumdrop Falls -- but in the long run they risk becoming commodities, like gasoline or sugar: If readers can't distinguish between titles, they're going to base their purchases on price per pound.

And if times get tough again, they may just as soon do without. Money magazines would do well to take their own advice. (1) Remember that markets go down as well as up. (2) Focus on the long term. (3) Above all, stick to your vision. Oh, and (4) it doesn't hurt to have a vision before attempting Step 3.

James Poniewozik

James Poniewozik is a Time magazine columnist on TV and media.

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