As a true-blue Fool, I am a long-term investor. I keep my eyes on the ultimate prize -- a comfy retirement for me and mine -- and I make plans and provisions for important nearer-term goals (such as funding my daughter's college education) along the way. I invest almost exclusively in mutual funds, too, which -- to borrow a line from Vanguard great Jack Bogle -- are "the finest vehicle for long-term investing ever designed."
I couldn't agree more. I recently had a chance to interview Bogle for an upcoming issue of Champion Funds -- the Fool newsletter designed to beat the market with funds -- and the man is a model of Foolish wisdom and common sense. When I asked, for example, what he would do if he could change one thing about the fund industry overnight, Bogle gave two compelling answers, the second of which pertained to individual investors such as yours truly.
"The second thing I would do is turn on a lightbulb over the head of every investor in America," said Bogle. "Don't forget the wisdom of investing: Invest for the long term, be very diversified, keep costs low and tax efficiency high. And don't pay a sales charge."
Check, check, check, and check. As Champion Funds subscribers know, all the above are among the criteria I use when making selections for the feature of the newsletter we like to call the Fund of the Month.
What's cooking?
So far, that's been a recipe for success. Since we first opened for business back in March 2005, I've tapped 32 funds for Championship status, and all but two have made money for shareholders. They've trumped their benchmarks on a collective basis, and each of our model portfolios -- which come in Aggressive, Moderate, and Conservative flavors -- are beating their bogeys, too.
Pleased though I am with our showing so far, I'm hardly a financial soothsayer. Far from it. Instead, I simply start with certain bedrock principles and use 'em as screens for analyzing the vast array of "products" that the fund industry has to offer. As every savvy investor knows, the majority of those are underachievers, and so I do everything I can to give the newsletter's subscribers important built-in competitive advantages.
For starters, our model portfolios are well diversified, featuring funds that invest in the go-go likes of Genentech
Well seasoned
Most important, however, is top-drawer management. The typical equity fund I've recommended boasts a manager who has been at the helm for nearly 10 years, a figure that more than doubles the industry average. That's critical because -- as I never tire of pointing out -- there's nothing innately special about a mutual fund per se. It's really the manager you're investing in, and so, as I go about the business of cherry-picking the cream of the industry's crop each month, I need to see a rock-solid track record of investing success -- and of consistency.
Indeed, one of my favorite Champs just now is actually lagging the market by nearly six percentage points on the year, in large part because the team at the controls refuses to deviate from its game plan in order to pursue this year's hot commodities. Instead, they're fixing the roof while the sun is shining, so to speak, playing defense by preserving their investors' capital and snapping up the kinds of companies they like on the cheap.
That strikes me as an especially smart game plan. The main job of Championship caliber managers, after all, isn't to chase hot sectors; it's to uncover tomorrow's winners today.
Kick the tires
If that sounds like a plan to you, too -- and if you're looking to jump-start your own 2006 investing game plan -- I encourage you to give Champion Funds a risk-free test drive. The newsletter is yours gratis for 30 days, a stretch of time that will allow you to stroll through our archives and kick the tires of every recommendation I've made.
You'll also gain access to our world-class discussion boards, which are positively brimming with fund investing insight and civilized conversation. So check Champion Funds out and let us know what you think. You've got nothing to lose and a wealth of investing insight to gain.
Shannon Zimmerman is the lead analyst for the Fool's Champion Funds newsletter service. He owns shares of Vanguard Total Stock Market. The Fool has a strict disclosure policy .
