The 30-Day Million-Dollar Challenge

I'll give you $1 million to invest for 30 days. If you can outperform the S&P during that period, I'll give you another million to work with.

Sound crazy? This was an actual proposition from a client I worked with in a previous job.

While some firms would have jumped at the offer, the company I worked for refused to accept it -- correctly, in my opinion. Such short-term speculation would violate various fiduciary responsibilities to the client. In other words, the company didn't want to be held responsible for such a risky -- and pointless -- challenge.

Why is it pointless? Thirty-day performance is simply not a prudent way to judge an investor's ability to pick stocks. Take, for example, one of the market's 10 best mutual funds, BridgewayAggressive Investors Fund, which consistently underperformed the S&P 500 in the summer of 1998. Had that been your "test" of the manager's investing strategy, you would have most certainly sold the fund in disgust -- but as a consequence, you would have missed out on the 20.8% annualized returns the fund has since produced.

There's a better way
If you put the small-"f" foolishness of the aforementioned challenge aside for a moment, you can see what the client was trying to accomplish. Like all investors, he was searching for superior returns and was looking for an astute investment manager to help him achieve them. Unlike most investors, however, he was willing to put $1 million on the line to do it.

The good news is you don't have to spend a million dollars to find a manager worthy of investing your money. Whether you're searching for a personal-asset manager to create a basket of stocks just for you, or for a mutual fund to complement your individual holdings, the basic screening tenets remain the same. Look for a management team that:

1. Charges low fees.
2. Has considerable tenure.
3. Offers a proven track record.

This is the same type of screen that Shannon Zimmerman and his Champion Funds team use to find top-notch mutual funds. And the strategy has proved successful -- Shannon's Champs are outpacing their respective benchmarks by an average of 9 percentage points.

Proof positive
In the August 2004 issue, for instance, the Champion Funds team selected a top-notch mid-cap growth fund with below-average costs and a bona fide manager with 20 years of experience and a large personal stake in the fund's performance. Since then, the fund has returned 23% to subscribers.

Current top holdings of this fund include:

As you can see, some of the fund manager's picks have performed very well, and some not-so-well, since the year began. And the fund is about even with the S&P over the past three months.

Has the manager lost his touch? Not at all. A low portfolio turnover rate of 29% and a history of outperformance tell me this manager's strategy is to select quality companies worth holding for the long run -- and that's a path to market-beating returns.

The Foolish bottom line
You deserve to have your money managed properly. After all, you work hard for it, and you don't want to see it carelessly wasted by an inept manager who happened to get lucky over a 30-day time frame.

If you're in the market for a few good managers, give Shannon's Champion Funds service a try, free for 30 days. You'll receive full access to all past and present picks, community discussion boards, and special reports. Just follow this link for more information.

Todd Wenning does not own shares in any of the companies mentioned in this article. Diebold is an Inside Value recommendation. The Motley Fool is investors writing for investors.