Successful investing takes a lot of learning. Luckily, though, it's easy to find teachers to impart the lessons you'll need to become a successful investor.
For instance, in the mutual fund realm, experience is priceless. An experienced fund manager knows many things a newcomer doesn't:
- Having seen the market cycle move up and down on many occasions, a seasoned fund manager knows how to adapt to find success, regardless of which direction the markets are moving.
- Long-tenured fund managers have seen a variety of fad investments come in and out of style, and they know that getting snared by the stock du jour will inevitably cost investors in the long run.
- To keep their funds running smoothly, experienced managers know how to handle the fundamentals of their own funds' business models, making their funds attractive to new investment while keeping them small enough to avoid limiting their ability to invest successfully.
Out of curiosity, I looked for funds whose managers had stuck around for extremely long periods of time -- at least since the end of the 1980s bull market and the 1987 stock market crash. Here are a few of the results I came up with:
|
Fund
|
Manager / Year Started
|
Assets (in millions)
|
10-Year Avg. Annual Return
|
Top Holdings Include ...
|
|
Stratton Multi-Cap (STRGX)
|
James Stratton (1972)
|
$69
|
4.2%
|
IBM (NYSE: IBM ) , Thermo Fisher Scientific
|
|
Bruce Fund (BRUFX)
|
Jeffrey & Robert Bruce (1983)
|
$186
|
15.9%
|
Kinross Gold (NYSE: KGC ) , Calpine
|
|
Valley Forge (VAFGX)
|
Bernard Klawans (1972)
|
$7
|
2.4%
|
Kimberly Clark (NYSE: KMB ) , 3M (NYSE: MMM )
|
|
Armstrong Associates (ARMSX)
|
C.K. Lawson (1971)
|
$12
|
(0.6%)
|
PepsiCo (NYSE: PEP ) , Praxair
|
|
Copley (COPLX)
|
Irving Levine (1978)
|
$57
|
0.2%
|
ExxonMobil (NYSE: XOM ) , FPLGroup (NYSE: FPL )
|
Source: Morningstar.
Interesting stories
Looking more closely, I noticed a few things that all these funds had in common. First, they're all either single unaffiliated funds, or have only a few siblings in their fund families. Second, they aren't nearly as big as you might expect to see from funds with their longevity. In my eyes, those two factors are related. A larger fund family might have given up on funds with relatively small assets, considering them insufficiently economical to run. But a dedicated manager has the ability to make things work even on the small budget that relatively low asset levels would require.
Also, when you look at the way these funds perform on a year-to-year basis, you can't necessarily discern any big edge over their competition. Although most of the funds managed to limit their losses to less than the S&P 500's drop in 2008, you'll see years of incredibly strong performance often followed by much weaker years, and vice versa. When you put all those years together into a single track record, though, these funds have all outperformed their peers.
How to learn
Attentive investors can learn from these and other mutual funds in a number of ways. For instance, by reading through regular fund reports and other relevant material, you won't just keep in touch with changes in the stocks in which your manager has invested. You'll also get to hear your manager's own opinions about the current market environment, prospects for certain stocks and industry sectors, and much more. You can find an example in the Bruce Fund's latest semiannual report:
The economy could be weaker for much longer than most believe. Preservation of capital is job one. Gains will be hard fought. Bear markets do several things; they wash out inefficient companies and create values. There will come a time to be more aggressive and we hope we will be ready.
Also, look at the portfolio moves a particular manager makes from quarter to quarter. That can help you draw conclusions about the overall strategy that your fund is using, which in turn can improve your own investing ability.
Finally, compare what these managers do with the actions of less experienced managers. You can evaluate what works and what doesn't, and then synthesize your own investing strategy from the best practices of many different successful managers.
You'll often find long-tenured managers at the helm of funds that have been particularly successful over the years. Be sure to take advantage of the wealth of experience and wisdom that those managers offer; it will make you a better investor.
More on using funds and ETFs:
RSS Headlines
Fool UK