Confused by the market's recent ups and downs? While it may turn out that the last few months have simply been the storm before the calm, it's equally possible that last week's bounce was merely a sucker punch "relief" rally, a temporary respite before Mr. Market turns moody again. We -- along with all those prognosticating financial pundits -- shall see.
Magic 8-Ball says.
Truth is, irrespective of what any market soothsayer might say, the collective will of investors is impossible to predict and can turn on a proverbial dime -- at least in the short term. Yes, the long-term trajectory of the stock market is upward, but needless to say, there can be precipitous drops en route to eventual investment riches. Just ask folks who were heavily invested in even high-quality tech companies such as Intel (NASDAQ:INTC), Cisco Systems (NASDAQ:CSCO), and Oracle (NASDAQ:ORCL) back when the market melted down in early 2000.
With that cautionary tale in mind, it seems obvious that, even for aggressive types with a high tolerance for volatility, insulating your nest egg from crack-ups is a huge part of being a savvy investor. After all, thanks to the miracle of compound interest, if you do a good job of preserving your hard-earned principal when the market hits the skids, it'll grow even faster when stock prices resume their ascent.
Fund your future
One smart way of getting that job done is keeping your individual equity picks to a manageable number of companies you can actually research and follow while investing the bulk of your moola in world-class mutual funds. If you're smart about it (and you know you will be, Fool), you'll be able to home in on cherry-picked keepers with managers that have fine track records of making gobs of money for their shareholders -- and of playing defense when the market heads south.
Consider, for example, the case of the now-closed Royce Premier (RYPRX), a fund that has appreciated by more than 42% since I first recommended it in the Fool's Champion Funds newsletter service. This fine small-cap pick opened for business on New Year's Eve 1991, and between January 1992 and the close of this past May, it has delivered an S&P 500- and Russell 2000-smashing total return of nearly 597%.
Just as impressive: Premier has experienced exactly one losing calendar year during the entire time it's been up and running. That came in 2002 when, as you may painfully recall, the S&P shed more than 22% of its value. Premier by comparison was, well, premier: It lost a relatively modest 7.8%.
The moral of the story
Don't get me wrong: Mutual funds are not volatility-free, and we've recommended funds in the newsletter that have had more spills and thrills than Premier. Still, anchoring your portfolio to a well-diversified collection of funds -- and then adding individual stock picks once you've done your homework on them -- makes a lot of Foolish sense for folks who hate losing money.
I've got a sneaking suspicion that group includes you, Fool. If so, I encourage you to snag a risk-free guest pass to Champion Funds, where we've done the mutual fund homework for you and compiled a market-beating track record of our own: Since first opening for business back in March 2004, our list of recommendations has outpaced the market by more than 10 percentage points.
Each of our model portfolios is beating its benchmark, too, and what's more, our picks hail from all over the mutual fund universe. From aggressive growth funds to more buttoned-down selections, our list of Champs (as we like to call 'em) allows you to cherry-pick funds from the cream of the industry's crop and assemble a portfolio tailor-made for your investing temperament.
The whole shebang is only a mouse-click away, so click here to get started and be sure to let us know what you think about the service on our members-only discussion boards. Your guest pass provides access to those, too. Quite the deal, no?
Shannon Zimmerman owns shares of Royce Premier. Intel is an Inside Value pick. You can check out the Fool's strict disclosure policy by clicking right here.
