Unfortunately, since many financial advisors working today entered the business in the 1980s and 90s, during the best stock market in US history, they became stock market specialists, favoring growth instead of income. Many of them also became heavily focused on mutual funds.

Mutual funds, in general, are a murky pool of investments that only publish their holdings once a quarter. That means in the middle of the quarter, you don’t know what stocks your money is invested in. And when you do find out, you may not always be getting an accurate picture. That’s because sometimes, fund managers will engage in something known as “window dressing”. Here’s how this tactic works:

Let’s say that during the quarter, a particular stock that the fund owns drops in value significantly and receives bad press. The fund manager may not want to sell it because its price is down. However, he might go ahead and sell that stock just before the quarter ends, so he doesn’t have to disclose that it was in the fund — but then he’ll go ahead and buy it back again when the new quarter starts. This is window dressing and it’s one of the problems that can result from the lack of transparency in this murky pool of investments.

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