There's nothing inherently special about any particular mutual fund; it's only as strong as the manager who's calling the shots.
Textbook example: Fidelity Magellan
Stars in your eyes
So how should savvy fund investors apply the "management matters" rule? For starters, don't get stars in your eyes. Star ratings and Lipper scores, after all, are attached to funds, not the people who run them. Moreover, while these purely backward-looking measures are useful as far as they go, for my money (and yours), they don't go nearly far enough. Indeed, a fund's ratings may not even belong to the manager who's at the controls now.
Fund geek that I am, I actually enjoy sifting through prospectuses and annual reports in order to separate the industry's keepers from its duds, and running background checks (so to speak) on fund managers is a key part of my fun, too.
For example, despite the fact that Dodge & Cox International Stock (DODFX) has only been up and running since 2001 -- a drop in the bucket in mutual fund years -- I recommended it to subscribers back in our June 2004 issue on the basis of its seriously talented management team -- a group that, on average, has 16 years of money management experience.
The upshot? Well, since the fund -- which recently counted GlaxoSmithKline
Focusing on the manager's track record is key to picking mutual fund winners. That's how I do it at Champion Funds, and the newsletter's list of recommendations has more than doubled up on the market's performance since we opened for business.
With that as a backdrop, I encourage you to take a risk-free trial of Champion Funds. Our back issues, model portfolios, complete list of recommendations, and top-shelf discussion boards come gratis for 30 days, a period that'll give you time to decide if the service is right for you.
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Shannon Zimmerman is the lead analyst for the Fool's Champion Funds newsletter service and doesn't own any of the companies mentioned. The Fool has a strict disclosure policy.