This past weekend, I had the thrill of a lifetime: I celebrated my first Father's Day as an actual father.
For gifts, I received a hammock, which I immediately assembled and read the newspaper in, and a fancy-schmancy grilling-out toolkit from Williams-Sonoma (NYSE:WSM).
Not feeling especially motivated -- what with the hammock and all -- I haven't put my new tongs, sauce brush, and sundry other pieces of impressive-looking equipment to work quite yet. Still, it's certainly nice to know that the next time I spring into barbecuing action, I'll have the right tools for the job.
Best of all, though, was the card I got from my 11-month-old daughter, whose mom says she merely transcribed what little Penny Lou told her to write. I have my doubts about that story, but it sure was a sweet message, one that made me think, naturally enough, of mutual funds.
Why so, you ask? Good question. Here's the good answer: To my way of thinking, a portfolio made up of carefully selected mutual funds is tailor-made for folks with more on their minds than how the market happened to fare on this day or that.
Don't get me wrong
I invest -- very selectively -- in individual stocks, too, and I certainly think performance tracking is part of the fun of investing. Indeed, it's for that reason that we keep daily tabs on each recommendation I've made since the Motley Fool Champion Funds newsletter service first opened for business back in March 2004.
And, like many of you, I'm planning for my family's financial future based on assumptions about the rates of return I'll earn over the number of years I have to invest. Those returns, therefore, matter a lot to me and so, to put it simply, my personal and professional aim is to beat the market over the long haul. But -- and this is key -- I want to do that with a minimum of volatility.
Take this year, for instance. So far, the S&P 500 has managed to eke out just a small gain. Folks who invest in such 500-tracking stalwarts as SPDRs (AMEX:SPY) and Fidelity Spartan 500 Index (FUND:FSMKX), for example, may not be exactly thrilled with a return in the neighborhood of 1%, I'll grant you that.
Still, compared with folks who have been invested this year in such individual names as IBM (NYSE:IBM), AIG (NYSE:AIG), United Parcel Service (NYSE:UPS), and Verizon Communications (NYSE:VZ) -- S&P 500 stalwarts all -- they've had a smashing success: Each of those companies has posted a double-digit loss thus far in 2005.
This dynamic works in the opposite direction, too, and if you can stomach the volatility, your search for nearer-term 10-baggers probably lies in the direction of individual stocks. For me, though, when it comes to saving for retirement, I prefer to ride a Segway, not a roller coaster.
Ah, sweet sanity
Which is precisely why I invest primarily in funds.
A portfolio composed of just individual stocks can easily be rocked and rolled by a mere shred of ultimately meaningless news -- a "bellwether" company missing earnings estimates by a penny, say. With funds, on the other hand, there's never a need to hang out at your computer all day, constantly refreshing your browser to find out just how much more (or less) wealthy you are than before that analyst on Squawk Box made his off-the-cuff remark.
Mutual funds are priced just once per day, after the close of business and after all the day's market dust has settled. As a long-term investor who likes to hang out in his hammock, I like the sanity of that policy.
Indeed, I take it as a comforting metaphor for the process of fund investing itself. At the very least, it sure beats whatever the heck is happening on the floor of the stock exchanges whenever you see them as backdrops during business news shows.
What are those people doing, anyway? Whatever it is, it sure makes the concept of "efficient markets" seem like an oxymoron, doesn't it?
Choosy investors choose champs
Still, while I think fund investing is the smart choice for virtually all long-term investors, that's only the case if you pick the right funds. And that's precisely why Champion Funds exists. The newsletter focuses like a laser beam on just those funds with core criteria -- cheap price tags, talented management, and sound investment strategies -- that make 'em worthy of a portion of your nest egg.
What's more, they're the kind of funds that allow you to swing (or even sleep) peacefully in your hammock while the stock market world churns and turns.
What, I ask you, could possibly be better than that?
Shannon Zimmerman, editor and analyst for Motley Fool Champion Funds, doesn't own any of the securities mentioned and you can take his newsletter for a risk-free spin by clicking here. The Motley Fool is investors writing for investors.
