The market is off to a lackluster start in these early days of 2007, but contrarian that I am, I take that as a positive sign. Pauses can refresh lengthy bull runs, and savvy investors know that when Mr. Market is in a funk, bargains abound. The question is how to identify them.
Go growth
As I read it, now looks like a fine time to give large-cap growth stocks careful scrutiny. Because they've been out of favor as a group (in relative terms) since the market melted down in early 2000, you can now snag the likes of Dell (NASDAQ:DELL), eBay (NASDAQ:EBAY), and Broadcom (NASDAQ:BRCM) at prices more than 30% below their respective five-year highs. That's true of Yahoo! (NASDAQ:YHOO) and Symantec (NASDAQ:SYMC), too.
Even Apple (NASDAQ:AAPL) is looking juicier these days. After popping up nicely on news of the iPhone, the stock has since swooned. Over the past four market sessions alone, the company that Steve Jobs built has shed some 10.6% of its value. Ouch.
Make no mistake
As Apple's recent trajectory shows, growth investing -- even among the big boys -- can be fraught with thrills and spills. And unless you have the time and inclination to separate the market's growth bargains from its sucker bets, you could find yourself with a crack in your nest egg -- and with nothing but overly optimistic growth assumptions to console you.
Fortunately, there's a simple solution: mutual funds. With funds, you can dial up your growth exposure in the context of a well-diversified portfolio that doesn't sink or swim with the fortunes of just a handful of stocks.
What's more, by cherry-picking the cream of the fund industry's crop, you can easily assemble an "all in" portfolio -- one that provides carefully calibrated exposure to international as well as domestic stocks from across the market's cap ranges and valuation spectrum (i.e., growth and value). Fixed-income funds are great vehicles for those in principal-preservation mode, and money market funds make good holding pens for your short-term and emergency cash.
Convenient, no?
Still, as handy and dandy as they are, the vast majority of funds are overpriced duds. The good news is that you can zero in on the keepers by focusing on a core set of criteria:
- Managerial tenure
- Expenses
- Past performance on the current manager's watch
Those traits will go a long way toward helping you ferret out winners.
Indeed, those three items are among the main attributes I look for while doing my homework for the Fool's Champion Funds newsletter service, and so far, our process has worked well: Since opening for business in March 2004, all but one of our picks has made money for investors. And taken together, our lineup has bested the market by nearly 12 percentage points.
The Foolish bottom line
To my way of thinking, a portfolio built on a foundation of rock-solid mutual funds is just about the only way to go "all in." If you'd like to sneak a peek at our winners' list, just click here to snag a completely free 30-day guest pass. You'll have access to our complete list of recommended funds, the newsletter archives, and our model portfolios as well. There's no obligation (at all) to stick around if you find it's not for you, but either way, be sure to let us know what you think on our members-only discussion boards. Yep, those come with your guest pass, too.
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service and co-advises Motley Fool Green Light with his pal Dayana Yochim. At the time of publication, he didn't own any of the securities mentioned above. Dell, Symantec, and Intel are Inside Value recommendations. Dell, eBay, and Yahoo! are Stock Advisor picks. You can check out the Fool's strict disclosure policy by clicking right here.
