When Champion Funds -- the Fool newsletter service designed to beat the market with mutual funds -- first opened for business nearly two years ago, our hypothesis was a simple one: Despite what you may have heard, we argued, it is indeed possible to beat the market with funds -- and with far less volatility than you would experience with a stocks-only portfolio.
Not that doing so is a piece of cake, of course. In order to accomplish that difficult mission -- one at which roughly three out of four funds fails -- you can't just throw darts at the financial pages of TheNew York Times or TheWall Street Journal. Rather, you have to approach fund investing with the same kind of rigor and brainpower that stock analysts -- at least those worthy of their year-end bonuses -- bring to bear on their work.
What it takes
So what does it take to pass muster with the criteria I use when making recommendations for Champion Funds? Glad you asked -- not least because it's precisely the same criteria that I think you should use when shopping for mutual funds on your own.
To wit: Savvy fund investors know that expenses are a huge consideration when it comes to choosing a fund to plunge into. Indeed, all else being equal, the fund with the lowest expense ratio is virtually bound to trump its pricier peers. How could it be otherwise? After all, a fund's price tag represents the amount of returns that would otherwise go to your account that, instead, trickle into the fund company's coffers in exchange for the services it provides.
With that in mind
That latter fact might lead you to believe that index funds have it all over their actively managed rivals. And make no mistake: Passively managed picks such as Vanguard Total Stock Market
Meanwhile, the typical domestic-stock fund will ding you roughly 1.4%. The typical Champion Fund, on the other hand, costs roughly 1%.
Still, while mutual fund fees are hugely important, they're not the only consideration you should have in mind when deciding where to plunk down your hard-earned moola. Far from it, in fact.
Core criteria
Among other core criteria I use when making fund recommendations for the newsletter's subscribers are manager tenure, stock-picking strategy, and long-haul performance. And I gauge that latter trait, by the way, relative to the time the fund's lead skipper has been on the scene. While there are plenty of places to find a fund's one-, three-, five-, and even 10-year performance figures, precious few will tell you how much of that track record owes to the manager who's actually calling the shots now.
Champion Funds, however, does -- as you can see for yourself with a totally risk-free test-drive of the service. Moreover -- and as you'll also see -- I do indeed approach my work as your friendly neighborhood fund analyst with the same kind of rigor that successful stock analysts employ.
After all, while we aim to beat the market while putting the fun back into fund investing, at the end of the day the newsletter earns its keep (or not) by returning your purchase price via the success of my picks. And on that front, so far, so good.
For the record
In addition to listing every fund I've recommended since Champion Funds first opened for business, our scorecard reveals that, on a collective basis, our recommendations are beating their respective indexes -- the S&P for equity funds and iShares' Lehman Brothers Aggregate Bond
Our model portfolios -- which come in Aggressive, Moderate, and Conservative flavors -- are beating their benchmarks, too.
So, c'mon, give it a try. You've got nothing to lose and a wealth of fund insight to gain. Indeed, a trial subscription to our newsletter affords you access to all our back issues and to our world-class discussion board, which is really the very best forum I am aware of for asking fund questions or just for testing out your own investment ideas.
Click here to get started, and... see you on our boards!
Shannon Zimmerman is obviously the lead analyst for the Fool's Champion Funds newsletter service. He owns shares of Vanguard Total Stock Market. The Fool has astrict disclosure policy.
