"I was shocked," Kevin Winans told the August 14th Wall Street Journal, reporting on his firm’s study, which soundly debunked the common wisdom that if you didn’t have at least $100K to invest you ought to be in mutual funds. "Consumers need to send a message to fund companies," he said, "to say ‘Hey, you guys are charging too much’."

But if you believe the WINANS INTERNATIONAL data, investors would be a lot better off, and would be sending a far more powerful message, by simply taking the Wall Street Walk.

The Winans study added up five years worth of one–time fees, like front and back–end loads, plus the annual fees reflected in the internal expense ratios that load and no–load funds levy, and compared them to the costs of owning a portfolio of 25 stocks over the same five years, based on Paine Webber’s fee structure. It assumed that the individual investor would have no turnover in year one, but would turn the portfolio over twice a year in years two through five.

The result: the investor would experience total charges of 15.5% in a back–end load fund, 11.8% in a front–end–loaded fund, 7% in a no–load fund and 6.4% in the $75K–25 stock fund he managed himself.

If anything, the Winans study greatly underestimated what a conservative investor with a "buy and hold" approach could actually save.

By using a discount broker instead of the full service/full price Paine Webber rate structure, an investor could cut commissions by more than half. By buying half as many high–quality stocks (no one should buy 25 stocks at a mere $3,000 each from any broker, in our opinion) would could cut the Winans costs in half again.

Further, they could and should religiously follow the long–term investor’s first commandment: sell only the losers (or which there should be few, relative to the market as a whole, if one sticks to high–quality companies) while letting the winners ride. Instead of churning the portfolio twice a year as in the model, or worse, selling the winners and holding the losers, as perennial losers – often egged on by their brokers – tend to do, one could cut these costs by another half.

Finally, by buying well–run companies – through well–run DSPPs with no or super–low fees and commissions – one can cut the investment fees to near–zero and the divestment costs to pennies per share.

As one might expect, other financial planners interviewed for the article were less than thrilled with the study. "Winans didn’t distinguish between large and small cap funds or between growth and value funds," said one. "Most individuals don’t have time to follow stocks closely enough," cautioned another. "The reason you get into a mutual fund is because you get someone who has been managing $50 million; they probably know something you don’t," said a third.

But, as the article pointed out, all too many mutual funds fail even to match the S&P 500 after expenses are deducted. And, as the article failed to point out, no one is preventing investors from spending 15.% of their nest egg on a back–end loaded fund that underperforms the market if they don’t have the time or know–how to try another strategy… although perhaps someone should be.