Size Matters!

In the world of finance and investing, size matters in many different ways.  For example, what do you do with all the mail you get from your mutual fund companies?  You know the stuff.  It comes in two sizes.  The big catalog size envelope and the small letter size.

The big envelope contains things like semiannual and annual reports or copies of the latest prospectus.  A lot of numbers and information.  These must be important, right?  So if you’re like most people I know, you look at these reports, maybe they sit on your desk or coffee table for a while, and then they probably get stuck in a file somewhere.  They’re big, they must be important.

But what about the small letter.  For some reason we associate these with junk mail and toss them in the can without even looking at them.  But wait, not so fast.  This is one time when good or at least important things come in small packages.  These small letters contain the notifications that, among other things, let you know your fund is changing managers or investment strategies.  Sure, some may contain the current privacy policy or other such things that very few of us read, but sometimes they really do contain important information.  How important? Just ask all the people that owned Fidelity Magellan when Peter Lynch, Magellan’s manager and architect left.  I bet they wish they opened the small letter.

Remember, in general, the large envelope contains information that happened in the past.  The small envelope contains information that will affect the future.

Size really does matter.