Just as a young hockey player worships Alex Ovechkin (Crosby is a baby) or a young basketball player worships Kobe Bryant, for some strange reason grown men and women worship money managers who have some track record of success. The main difference is that while most kids will never be able to duplicate their sports idols' success, matching or even outperforming a "legendary" money manager isn't out of reach for investors.
With another quarter in the books, we have another chance to review the track record of the investing "legends" that most investors aspire to be.
The Joe DiMaggio of investing?
I don't use the word "worship" lightly when speaking about the infatuations some investors have with famous money managers. A few years ago, a fellow Fool actually confessed his love for the "legendary" Legg Mason mutual fund manager Bill Miller. Miller was once known as the Joe DiMaggio of mutual fund managers for topping the S&P benchmark for 15 straight years with his Legg Mason Value Trust.
Recently, however, Miller has not been as successful. In the just second quarter of 2010, his fund was down by about 16%. In fact, if you had invested your money with Miller five years ago, you would have lost nearly 10% per year, compared with 1% losses for the S&P 500.
The small-investor advantage
Is Bill Miller a bad investor? Far from it. He's actually a great investor, but he's burdened with the difficult task of having to put new money to work whenever investors allocate capital into his fund. As much smaller investors, we actually have a great advantage over Miller and others in his cohort. While these large fund managers must always be fully invested, we can steal their ideas and invest on pullbacks or in healthier markets. Additionally, with a little research, you can avoid the sales fees that funds like Miller's charge. Best of all, when you beat Miller, you can brag about it, too.
For instance, if you still love Bill Miller, take a look at what the fund owns. Global power company AES
The market is your mama
The point is that the idea of the mythical investor is a bit of a fallacy. The market beast doesn't care if your name is Buffett, Miller, Gecko, or Cramer. Do your research and follow the research of some of these fund managers, and you'll have a very good shot at topping their returns. As my "legendary" Georgetown professor always says, "The market is your mama." Do your homework, and you won't get sent to your room.
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