It's easy enough to suggest that people who feel they're too busy to pick their own stocks should instead invest in mutual funds. A simple index fund will suit most investors' needs perfectly. But those who want even better returns need to find outstanding mutual funds with a good chance of beating the market over the long haul -- and that's where things get sticky.
How exactly can you tell the good funds from the bad? Strong long-term track records and low fees are good criteria for starting your search. But you should look at more than just quantitative factors, lest you end up in funds with shady managers or disagreeable investing practices.
See a good match
Don't just look at a fund's numbers -- examine its managers, too. It isn't always easy to discover how the people running a fund think and invest, and if you find you can't learn much about a fund, consider skipping it. There are plenty of great funds that also communicate well with their shareholders.
I'm a shareholder in the Oakmark Select Fund (OAKLX), for example. Though it's lagged a bit in recent years, it's amassed a decent track record overall. Its top holdings include H&R Block
Each quarter, I get a report from Oakmark on the fund's performance, plus regular emails offering commentaries from management, transcripts of speeches the managers have given, and other extras. It's a great way to get to know the people running a fund, and to decide whether you like them and their thinking.
Another good example
A while back, I discovered another fund that stands out in this regard, thanks to our Champion Funds newsletter. This mid-cap, value-oriented fund boasts a remarkable annualized average return of roughly 8% over the past 15 years -- enough to have turned a $10,000 investment into almost $32,000 in that time. Its top holdings include Philip Morris International
I received a welcome-to-the-fund phone call when I invested, and that's been followed by at least one mailing per month, on average. The fund issues a monthly newsletter with guidance and commentary from the fund's main manager, and I've also received a "Methods" pamphlet containing an educational essay on diversification and the fund's take on it. When I visited the fund's website, I found a section full of essays and other valuable commentary. In short, this fund is open about both its style and thinking.
Dig for details
As you hunt for great funds, be sure to pay attention to managers and their philosophies. The more open a fund's manager is, the more accurately you can evaluate whether that fund fits with your own investment philosophy.
We'd love to introduce you to some top-notch funds via our Champion Funds newsletter. A free 30-day trial will grant you access to all past issues and our full list of recommended funds.
