Whether it's my relatives or people sitting next to me on planes, I get asked the question all the time: "What should I do with my money?" Personally, I think it's hard to go wrong picking a great mutual fund manager and letting him do all the work. Here are two of my favorite value mutual funds.
All's fair at Fairholme
If I had to pick one mutual fund to put all of my money in for the next 10 years, it would be Fairholme (FUND: FAIRX ) . Under legendary manager Bruce Berkowitz, the fund has trounced its benchmark averages. If you'd invested $10,000 in the Fairholme Fund at its inception at the end of 1999, you'd now have $36,615, compared to $11,849 if you'd invested in an S&P 500 index fund.
Just as importantly, the Fairholme Fund's returns are strong on a risk-adjusted basis. Motley Fool Stock Advisor pick Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) is the fund's top holding, at 17.5% of assets, according to Morningstar.
While we all know the merits of Berkshire Chairman Warren Buffett, Fairholme has also found other strong performers, including Inside Value recommendation Sears Holding (Nasdaq: SHLD ) and Leucadia (NYSE: LUK ) . Sears CEO Eddie Lampert and Leucadia's management team of Joseph Steinberg and Ian Cumming are often mentioned in the same sentence as Buffett. It's hard to go wrong when you've got a skilled mutual fund manager allocating your capital to equally skilled corporate managers.
A fund for all seasons: Wintergreen
How would you like to eat filet mignon for what a sirloin steak costs? I can't help you there, but I can tell about the Wintergreen Fund (FUND: WGRNX ) , a top-quality mutual fund without the hedge fund expense ratio.
Before founding Wintergreen Advisors, fund manager David Winters trained under one of the best in the business: Mutual Series' star manager Michael Price. After that, Winters could've easily started a billion-dollar hedge fund, charging investors 1% of assets plus 20% of its profits.
Instead, Winters decided that a "mutual fund is a truly democratic way [to invest]. You can invest your friends' money. It is nice to be able to do a nice job for people who need the money." The fund does charge 1.95% of assets annually, which puts its costs on the high side compared to an average mutual fund. But Wintergreen is hardly average.
The Wintergreen Fund has been off to a strong start since its inception in October 2005. In the past year, and from inception to date, the fund is up 34% and 24%, respectively.
The fund also offers global diversification, with top holdings including foreign stocks like Japan Tobacco. Winters' domestic picks include Consolidated-Tomoka Land (NYSE: CTO ) and Wynn Resorts (NYSE: WYNN ) , both of which have very valuable land holdings, as well as Berkshire Hathaway.
As with Fairholme, the Wintergreen Fund has been able to achieve strong returns on a risk-adjusted basis and looks to be a good long-term bet for investors.
What not to do
You shouldn't expect to use these mutual funds to score quick profits in the short run. I'd only advise investors to invest with these funds if they're willing to make a long-term commitment. I have no idea whether these managers will outperform their benchmarks in the next year. But over the next three or five years, I'm much more confident that their funds will perform well, outpacing their peers by a sizable margin.