Just Give Up

If you'd seen me doing my laundry over the past few weeks, you'd have seen me emptying a bucket that keeps filling with water by my washing machine, and you'd have seen me carefully stepping around streams of water that are meandering and pooling all over my basement floor, and you'd sometimes even have seen me using my Shop-Vac to vacuum up some of that water. It's not a pretty sight, and despite my attempts to clear out a seemingly clogged drain, I haven't solved my problem.

Sometimes it's best to call in a professional.

There's a good reason why we don't do our own dentistry, and why many of us don't fix our own cars. There's just no way that we can be sufficiently informed about and skilled in every area that occasionally needs our attention. Heck, we're not even interested in many of these areas. Investing, for plenty of us, is one of those areas.

Why you might give up
Do you enjoy studying lots of companies and digging deep into their financial statements? Are you good at it? Do you like following their progress and thinking about which ones will prosper and which will end up in corporate graveyards? Do you even have the time to devote to it, or would you rather spend that time playing with your children, or shopping, or golfing, or working, or even just crossing lawn-mowing off of your to-do list?

Many of us just don't have the time, interest, or skills to invest successfully. This doesn't mean I don't believe that most of us could be quite good at it if we decided to focus on it. Many of us just keep losing money in stocks. Here, check out these companies -- which were (or are) rated four or five stars in our CAPS investing community. They're down considerably over the past year because many people have sold them -- yet, to many others, they hold great promise. Odds are, you're looking at a world of mistakes: investors selling what they should hold, and buying what they shouldn't, often only to sell too soon:

Company

CAPS Stars (out of five)

52-Week Return

Apple (Nasdaq: AAPL  )

* * *

(23%)

Chevron (NYSE: CVX  )

* * * *

(28%)

Petroleo Brasileiro (NYSE: PBR  )

* * * * *

(35%)

UnitedHealth (NYSE: UNH  )

* * * * *

(21%)

Suncor Energy (NYSE: SU  )

* * * * *

(45%)

General Dynamics

* * * *

(30%)

Fluor

* * * * *

(39%)

Data: CAPS.Fool.com.

I myself have made some brilliant investments and also some boneheaded ones. Every time I lose a few thousand dollars on a misguided investment, I remember a compelling alternative thing I could have done with that money: I could have invested it in a good mutual fund and let some skilled pros manage that money for me. In fact, that is what I'm doing with an increasingly larger chunk of my money.

What to do
You don't have to move all your money into funds, but consider this: Good fund managers are smart, and principled, and experienced in investing. They (and their helpers -- how many helpers do you have?) are paid to spend all day studying stocks. They may do a better job of managing your money than you can -- especially in volatile markets. They may let you sleep better at night.

Consider, for example, the Ivy Asset Strategy C (WASCX) fund, invested in bonds as well as stocks such as Chevron, Philip Morris (NYSE: PM  ) , and Gilead Sciences (Nasdaq: GILD  ) . Check out how it has outperformed the S&P 500 in average annualized returns:

 

Ivy Asset Strategy

S&P 500 Index fund

Over 3 years

6.2%

(7.1%)

Over 5 years

13.3%

(1.7)

Over 10 years

9.9%

(1.8%)

Data: Morningstar.

The downside here is that most managed mutual funds don't beat the market, so you do have to select your funds carefully. You also want to avoid sales loads, if you can, and find managers who have been at the helm for more than a year or two and whose philosophies and approaches you respect. In addition, look for low fees, and, ideally, low turnover. The Ivy Asset fund, for example, charges a rather hefty 1.8% annual expense fee, while many solid funds charge 1% or less.

So, proceed diligently and vigilantly -- or let us help you by doing much of the legwork for you. (Again -- seek help, when you can't, or won't, do a great job on your own.) I invite you to check out our Motley Fool Champion Funds newsletter, which is where I've gotten some good leads, myself. Try it for free and see which funds have been recommended -- and why. Together, our picks have been beating their benchmark indexes by some six percentage points. Stock funds, balanced funds, small-cap funds, foreign funds, bond funds, value funds, funds for your 401(k) ... you name it, and we've got some for you, whether you're an aggressive or conservative investor, or somewhere in between.

Just don't put it all off, because now sure seems like a particularly great time to invest!

Longtime Fool contributor Selena Maranjian owns shares of Apple. Petroleo Brasileiro is a Motley Fool Income Investor pick. UnitedHealth Group is a Motley Fool Inside Value recommendation. Apple and UnitedHealth Group are Motley Fool Stock Advisor picks. The Fool owns shares of UnitedHealth Group. The Motley Fool is Fools writing for Fools.


Read/Post Comments (7) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 10, 2009, at 1:32 PM, agragr wrote:

    You used a 52 week return to judge 5-star stocks but 3 to 10 years to judge funds. How did the 5-star stocks you cite perform over the last 3 years? And it's easy to pick funds that did well looking backwards.

  • Report this Comment On June 10, 2009, at 6:45 PM, stan8331 wrote:

    You don't need to be Warren Buffett - or to spend every waking hour poring over financial statements - to severely beat the vast majority of mutual funds. There certainly is a place for mutual funds - they're great for those who don't have any time to spend on research, and unavoidable for those of us who have retirement accounts that don't allow investment in individual stocks.

    However, mutual funds have a variety of characteristics - including with their expense ratios, constraints on how they can apportion their funds, and an inability to invest in small companies without moving the market - that provide indivdual investors with a very significant advantage. I am definitely no Warren Buffett, but where I'm given a choice between investing in stocks and mutual funds, I'll gladly take my chances with stocks.

  • Report this Comment On June 11, 2009, at 1:53 AM, NOTvuffett wrote:

    Ummm, if these professionals are so smart why can't most managed funds beat the market? My experience trading individual stocks is low, and I don't have lots of risk tolerance either. Also don't have lots of time to devote to it, working 6 days a week.

    So, I have only been trading stocks since the end of last May, as of today I am up almost 18%. I did that without doing shorts, or trying to guess what would be the next wal-mart or microsoft, or even doing options (I don't trust myself to do those things yet). If I felt comfortable with those things probably would have made much more. Oh I left out that I pulled a lot of boneheaded mistakes.

    I agree with Stan (and I am no Warren Buffett either), stocks beat the hell out of mutual funds if you even have a little time to research on sites like the Fool.

  • Report this Comment On June 11, 2009, at 2:32 AM, majordm wrote:

    overseas markets recovering nicely, but here we get sideways and a bunch of 'welcome to the new NEW'.

    zzzzz. we are the land of the sub prime con men, the PT barnum 2.0s of the world, so here is the reaping. whine about hyperinflation as you will.

  • Report this Comment On June 12, 2009, at 9:47 PM, TimothyVR wrote:

    The last two years have made it clear that mutual funds are often just as risky as individual stocks. I have investments in two Europe-based funds that lost between 70 and 80% of their value.

    I am in for the long haul. They are in a retirement account and I didn't sell, and they have recovered some of what was lost - but it did make me think "Maybe I can try to invest on my own".

    I still have investments in several funds, but I am balancing that with individual stocks. I am focusing on a few dividend aristoicrats as well as a few high-risk stocks.

    I agree that we shouldn't dismiss mutual funds, but I am glad I have decided to make my own decisions as well. The returns on Coke, Pepsi, Johnson & Johnson and Procter & Gamble are as reliable as the best mutual funds and the dividends are much better.

  • Report this Comment On June 12, 2009, at 9:59 PM, theHedgehog wrote:

    It's interesting that in good times, there is lots of traffic on the Index Funds board, but in bad times not so many.

    If you want to invest (you should) and don't have the time to compete with Warren Buffett (who does?) consider buying VTSMX from Vanguard. VTSMX is the total market index fund, and is probably more appropriate for most investors than trying to figure out individual stocks.

    Disclaimer: I don't own any Vanguard Index Funds (I have some non-Vanguard index ETFs) and I don't have any financial interest in Vanguard, the company.

  • Report this Comment On June 15, 2009, at 9:25 PM, HarryCarysGhost wrote:

    Trust in Thyself.

    Nobody cares more about your money then you.

    By definition mutual funds are forced to sell when things go bad. They make their money on constant movement.(Same with brokers)

    Individual investors can wait it out.

    Peace.

Add your comment.

DocumentId: 917926, ~/Articles/ArticleHandler.aspx, 7/30/2014 12:58:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement