Declaw the Bear

I've got news for every Dell (Nasdaq: DELL  ) investor reading: You could have spared your portfolio the agony of a 30% paper loss this year.

The beauty of diversity
How? By embracing the diversity offered through mutual funds. Bill Miller of Legg Mason Value Trust (LMVTX) has beaten the market for 15 years running, and he acquired Dell shares sometime between September 2005 and March 2006. Look what's happened since.

But have Value Trust investors suffered? Hardly. The fund may be down 8% or so for the year, but that's a fraction of what Dell shareholders have suffered. What's more, Value Trust owners continue to have exposure to a range of great public companies:

LMVTX Top 10 Holdings

% of Assets

Sprint Nextel (NYSE: S  )

5.7%

Tyco International (NYSE: TYC  )

5.2%

AES

5.0%

Qwest Communications (NYSE: Q  )

4.8%

Amazon.com

4.7%

Google (Nasdaq: GOOG  )

4.4%

UnitedHealth Group

4.2%

JPMorgan Chase (NYSE: JPM  )

4.2%

Sears Holding (Nasdaq: SHLD  )

4.0%

Countrywide Financial

3.0%

Source: Legg Mason

Beat the bear with top-notch funds
And that's not all. Many superior investors have been losing money on Dell recently. But some of these funds are even up for the year. Dodge & Cox Stock, for example, is up approximately 7% during 2006.

Profit from the choices of champions
Investing isn't a perfect science. And there are times when you should concentrate, like when you have studied a stock so closely that you have ve every reason to believe it will go nowhere but up. But such situations are rare, which is why it's usually best to diversify to avoid the wreckage created when good stocks go bad, as Dell has.

Of course, investing in funds for diversity's sake alone is bad strategy. Only a handful are really worth your time. Finding them is Motley Fool Champion Funds advisor Shannon Zimmerman's passion, and he's crafted a portfolio that's up more than eight percentage points on the relevant benchmarks. Get access to his insights and every Champion Funds buy report by taking a risk-free trial to the service now. There's no obligation to buy.

Fool contributorTim Beyersis still a stock jock, but he's liking funds more and more every day. Blame Shannon. Tim didn't own shares in any of the companies or funds mentioned in this story at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Foolprofile. JPMorgan Chase is an Income Investor recommendation. Amazon.com, Dell, and UnitedHealth Group are Stock Advisor recommendations. Tyco, Dell, and UnitedHealth are Inside Value picks. The Motley Fool'sdisclosure policyis always championship caliber.


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