Long-term investing is the only way to fly when it comes to finding retirement bliss, but if you're reading this, chances are strong that you like to keep an eye -- perhaps even two -- on the market's shorter-term movements as well. Could be it's just your hobby (it's certainly one of mine), and if you play your cards right, you might even find a way to turn you avocation into well, not a vocation exactly, but perhaps a profitable sideline.
On the upside .
Just ask folks who plunked down their hard-earned moola on small-cap stocks back when large caps were all the rage. Indeed, from the bubble-bursting that occurred in March 2000 through the close of this past June, the small-cap-centric Russell 2000 has spanked the large-cap-oriented S&P 500, delivering a total return of nearly 36% while the S&P has eked out just roughly 3%.
You might also check in with those savvy types who zeroed in on choice real estate or natural resource investments just a few years ago. To wit: Of all the categories that fund researcher Morningstar tracks, those two have taken all comers over the past five years. Indeed, a $10,000 investment plunked down on just the typical real estate or natural resource mutual fund five years ago would have more than doubled by now.
Impressive, but alas, not very useful: When you're looking for tomorrow's winners, rear-view mirror perspectives don't help much -- except perhaps as contrarian indicators.
. and on the down
Enter what I like to call "intelligent opportunism."
Given the market's recent choppiness, I'd argue that patient investors have been handed a (pardon the pun) wealth of opportunities. Witness long-haul outperformers such as Citigroup (NYSE:C), Home Depot (NYSE:HD), Countrywide Financial (NYSE:CFC), and Capital One (NYSE:COF), all of which trade with price-to-earnings ratios that clock in below those of the broader market and their industry peers.
Take a gander as well at the racier likes of Yahoo! (NASDAQ:YHOO), Amazon.com (NASDAQ:AMZN), and Broadcom (NASDAQ:BRCM), erstwhile high-fliers with outsized earnings-growth prospects -- and stock prices more than 30% below their respective 52-week highs.
The sure thing?
Make no mistake: None of the above is a sure thing. Which is precisely why it pays to own any of them in the context of a well-diversified portfolio. Ergo, mutual funds -- the investment vehicle of choice for more than 90 million of us. Yes, I know the typical fund gets a bad rap -- and deservedly so. Most of them are overpriced, underperforming duds. And the typical fund is, well, typical -- the very definition of mediocre.
But no one ever said you had to invest in the typical fund. Indeed, if you bring the same kind of analytical rigor to bear on funds that you do on stocks, you can pull off a nifty trick: racking up market-beating performance without the kind of volatility that comes with owning a portfolio of just individual equities.
A good deal, no?
Steady, as she goes
That's precisely the bargain we try to strike each month in Motley FoolChampion Funds, the newsletter service dedicated to beating the market with mutual funds. Yes, like the rest of the market, we've taken our lumps lately. But you know what? Despite the recent ups and downs, our overall lineup is holding steady, besting the market by more than eight percentage points as I type.
If you'd like to sneak a peek at how we're getting that job done, just click here for a free 30-day guest pass to Champion Funds. Your pass, by the way, is of the all-inclusive variety, providing access to our complete list of fund recommendations, as well as the newsletter's back-issue archives, model portfolios, and members-only discussion boards.
There's no obligation to subscribe if you find it's not your cup of tea, so go ahead and give it a whirl. You've got nothing to lose -- except, perhaps, any of those typical funds you might happen to own.
At the time of publication, Shannon Zimmerman didn't own any of the securities mentioned above. Home Depot is a Motley Fool Inside Value pick, and Amazon.com is a Motley Fool Stock Advisor recommendation. You can check out the Fool's strict disclosure policy by clicking right here.
