The mutual fund "secret-in-plain-sight" that could be costing you money - and what you can do about it. Plus BIG news on our simpler, smaller fees. Dear Investor, It's something that everybody in the investment industry knows, but nobody (especially most actively managed portfolio managers) wants to talk about. Well, nobody but us. Why? Because The Motley Fool believes investors like you should have all the information you need to make smart decisions about where and how you invest your money. That's just how the Fool rolls. But I digress. Back to the secret … It begins with the headline from a November edition of the Financial Times: "Fewer Active Managers Beat Market Than At Any Time In Decade." According to the Times, recent figures from Bank of America showed that fewer than one in five active mutual fund managers have outperformed the stock market so far this year.1 So why should you care? Because if you're a mutual fund investor, now is a time when you desperately need to consider what's in your portfolio. You see, there's a chance you could be putting money in a fund that acts like an index fund but charges higher fees - thereby hurting your changes to beat... or even match... the market's return.2 Oops. The secret-in-plain-sight is out. Why does this happen? And more importantly, what can you do to cut costs and get better returns. (Other than just investing in index funds?) The answer to the first question is twofold. Fees. And fear. We've already talked about the fees. Let's talk about the fear. Back in the 1980's there was an advertising catchphrase that said "Nobody ever got fired for buying IBM." Today, in terms of the investment industry, the phrase might go something like "No portfolio manager ever got fired for marching in lockstep with the fund's benchmark"—even if it marches him off a cliff. So, what do you do if you want to invest in an actively managed fund that has a fighting chance to beat its benchmark? Glad you asked. When The Motley Fool decided to get into the mutual fund business back in 2009, we did something "Foolish." We created funds and set benchmarks (because you have to have a way to measure success)—and then set about ignoring those benchmarks. Why? It's simple. At The Motley Fool, we are 100% committed to buying into the very best companies at the very best prices even if it means diverging from our benchmark. If the benchmark zigs and our portfolio manager thinks we should zag, we zag. And let the chips fall where they may. We're not afraid to look "small-f" foolish by punting on the short term in favor of the long term. "So how's that 'ignoring the benchmark' thing working out for you?" Actually, pretty darn well. With Institutional Investor's 2011 "Rising Star,"* Bill Mann, at the helm, our Independence Fund recently celebrated its five-year anniversary, with one-year returns of 10.43% and three-year annualized returns of 15.05% as of 10/31/14. And while we can't guarantee that the Independence Fund will continue its climb, we CAN guarantee that Mann and the Fund are going to keep on doing what they're doing. Which is keeping a keen eye on value and ruthlessly hunting down the kind of companies that he thinks will deliver long-term capital appreciation for investors — no matter where he finds them or whether or not the benchmark "agrees" with his choices. All at what Morningstar says is below-average risk compared with funds in the same World Stock category as of 10/31/14. Kind of makes you want to get that "ignoring the benchmark" thing working for you, doesn't it? Think ignoring the benchmark is a radical concept? Wait. There's more … Remember the financial meltdown of 2008? (It would take industrial-strength mind bleach to make you forget it.) One of the mind-blowing revelations of that disaster was that certain securities companies were betting against the very products they were promoting to investors — and making huge amounts of money doing it3. What made it work was ... that word again ... secrecy. Investors didn't know what the firms they were investing with were buying, selling or betting against. And they got burned. Badly. That's something that will never happen at The Motley Fool. We operate under a principle we call "Radical Transparency." Unlike many firms that even to this day hold information about exactly what securities they are trading very close to the vest, the Fool is forthright. When you invest with us, you'll know exactly what the company is investing in. What the individual funds are investing in. And even what the fund manager is personally investing in. So if Bill Mann buys so much as a stick of gum (figuratively speaking, of course), you'll know about it. When it comes to investing, information is power. And the Fool firmly believes that power should be in our investors hands. We're focused on delivering superior returns — and an investor-friendly experience. When you invest in Motley Fool funds, you're invested in more than just financial instruments. You're invested in a culture that's dedicated to independence, openness, and creating an "investing community" experience. - The market might get shaken up, but we won't. We're in it for the long haul (and you should be, too). We don't follow fads or time the markets. Our eyes are firmly on the prize, and we won't divert our gaze. When asked how long we like to hold on to a stock, our standard answer is "forever."
- When the market takes a dip, we won't tap dance around the subject. You'll get a Foolish, frank, jargon-free discussion about the ups, downs, and the way forward. In fact, radio host Chuck Jaffe of the highly listenable MoneyLife show says "Motley Fool Funds has the best paperwork in the business—the most readable prospectuses."
- We think of you as an investing partner — and treat you that way. Which is why we encourage you to talk to us as much as we talk to you. Got a question? Ask it. Simply shoot us an email at askbill@foolfunds.com and we'll answer it — in our Declarations newsletter or in our Question Authority column on the website.
- Trades, insights, and information are just a click away. Hey, the Internet is our home. And thanks to our secure, interactive website, FoolFunds.com, you can feel just as comfortable as we are investing and managing your account online. If not, you can always invest in the Motley Fool Independence Fund (and all our others) through your broker.
- Five years of results. Back in 2009, when we started the Motley Fool Independence Fund, investors had to take a leap of faith. And thousands did by investing almost $100 million that first year alone. Today the results are in. And although past performance is no guarantee of future returns, our five-year track record and investing style are now well established.
Yet ANOTHER radical development — simpler, lower fees! At the Fool, we're not afraid of change. If something works better for our investors, we're all over it. Which is why we've changed our fee structure. This spring, we eliminated the fulcrum fee, which caused fund fees to rise and fall with the performance of the fund. In addition, we're lowering our management fee and the cap on total expenses charged by the fund. What does that mean for you? As a shareholder, you'll be able to count on a stable fee and a lower rate of 1.15%, down from 1.35% plus or minus the adjustment for the performance of the fund. Lower fund fees mean higher fund returns. That means you get to keep more of what your money makes. What's not to like about that? What won't change is that The Motley Fool Independence Fund will continue to be a no-load fund. You'll never have to pay an up-front sales charge or commission to invest with us — or pay those annoying 12b-1 fund-marketing fees, either. Perhaps best of all, our "Rising Star*" portfolio manager, Bill Mann, is heavily invested in The Motley Fool Independence Fund, so you, he, and we are all in it together. Why? Because it's the right thing to do. Risks and rewards. As we all know, investing can be a risky business. You could make money. You could lose money — including principal. The only thing we can promise is that The Motley Fool Independence Fund's manager will work hard to achieve long-term capital appreciation by investing primarily in common stocks and equity-related securities. No doubt it's a great fund with a solid track record, but we have to tell you, it's not for everyone. If you're looking for income to live on now or money to pay for your kid's college tuition next year, this is definitely not the fund for you. That being said … The mutual fund "secret-in-plain-sight" is out — and the five year returns on the Independence Fund are in. Now that you know the secret that most "active" funds are actually managed like index funds, why buy them? Especially when PATIENT, long-term investors (like you?) can build wealth over time with the truly actively managed, Motley Fool Independence Fund. True, the journey to reaching your long-term financial goals with The Motley Fool Independence Fund is a long one. But the good news is, you can start it in an instant. Simply click here to look over the fund prospectus and purchase your shares today. Remember, when it comes to investing, it's smart to be Foolish! I look forward to welcoming you as a new Motley Fool Independence Fund shareholder soon. 
Matt Trogdon
Motley Fool Funds P.S. Don't do investing online? No problem. You can also invest in Motley Fool Funds directly through your broker — including Fidelity, Charles Schwab, TD Ameritrade, Scottrade, USAA, Vanguard, E*Trade, and others. P.P.S. Keep more of what you earn thanks to our lower, simpler fees! You'll enjoy the new fees on all your shares — even shares you already own. It's our way of saying thank you for our first five years…and it's our commitment to your future. Invest today! Please consider the charges, risks, expenses and investment objectives carefully before you invest. Please click here to see a prospectus containing this and other information. Read it carefully before you invest or send money. *The Rising Stars of Mutual Funds are chosen annually by the publishers of Institutional Investor News and represent individuals whose accomplishments in and contributions to the industry make them standout among their peers and position them as future industry leaders. Award winners were required meet the following criteria: leadership in portfolio returns and/or winning strategies; notable contributions to growth in assets and/or client base; formal recognition by their firm and/or industry groups; active contributor to the broader mutual fund community; and other quantifiable contributions to their firm and/or industry. More than 30 nominees were considered. Past success is no guarantee of future success. | 
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