For all too many otherwise smart people, investing is a zero-sum game. You either invest in growth stocks like eBay (NASDAQ:EBAY), Corning (NYSE:GLW), Amazon.com (NASDAQ:AMZN), or Starbucks (NASDAQ:SBUX) -- each of which boasts earnings-growth estimates of 20% or greater for the next five years -- or you seek out value plays like IBM (NYSE:IBM), ExxonMobil (NYSE:XOM), or Toyota Motor (NYSE:TM), stalwarts that trade at price-to-earnings (P/E) ratios below that of the broader market.
Putting your money in equities or bonds is another ill-advised zero-sum calculation, as is investing just in individual stocks or mutual funds.
Trouble is, committing exclusively to one of these directions means ultimately having to say you're sorry. The market really does move in cycles, sometimes spastically so: Witness the S&P's steep decline this month.
You could stop a clock
Like a stopped clock, either/or investors will be right from, um, time to time, but over the long haul, their chances of sleeping or, perchance, of dreaming peacefully at night while beating the market are significantly diminished.
The good news is that avoiding that fate is relatively light work: Don't focus myopically on one approach to investing, and don't just try to cherry-pick individual stocks that you hope will be winners. Instead, focus on building a smart portfolio that will see you through to your golden years while keeping volatility in check.
One for the money
For my money -- and, I'd argue, yours -- the best way to get that done is by plunking down the lion's share of your retirement savings on world-class mutual funds.
With, say, 70% to 80% of your hard-earned moola invested in the kinds of well-diversified picks that we recommend each month in Motley Fool Champion Funds, you'll be in a good position to earn market-beating returns and have some fun supplementing that core portfolio with individual stocks that you've researched and found worthy of a spot in your retirement basket.
Step right up
That's key, too. Lots of folks see investing as a game, a competition in which they make bets on which stocks Mr. Market will declare All-Star contenders and which he'll send back for a stint in the minors.
Make no mistake: Investing can and should be fun, but there is no offseason. Thanks to the miracle of compound interest, the better job you do on defense (i.e., preserving your principal), the better job you'll necessarily do on offense (i.e., growing your principal so it'll meet your needs in retirement).
How best to proceed?
Well, biased though I am, I'd encourage you to take a completely free 30-day sneak peek at Champion Funds. In addition to our market-shellacking list of individual funds, we have model portfolios that can help you lay a rock-solid investment foundation. Once that's in place, you'll be far better prepared to go about the riskier business of making individual stock picks.
With Champion Funds, you'll even get the inside scoop on what some of the world's best money management minds are thinking as they construct portfolios that involve billions of dollars.
Interested? Excellent. Click here to learn more about how you can beat the market while clamping down on all that pesky volatility.
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service, and at the time of publication didn't own any of the securities mentioned above. Amazon.com, Starbucks, and eBay are Motley Fool Stock Advisor recommendations. You can check out the Fool's strict disclosure policy by clicking right here.
