Market sell-offs are painful, of course, and adding insult to injury is that their pain isn't distributed equally -- at all. Just ask shareholders of Wyeth
A portfolio Band-Aid
Then, too, there's the fate of fund investors versus folks whose portfolios include just individual picks. Even seemingly conservative plays, after all, can suffer protracted periods of decline -- Pfizer
Indeed, it's even possible to make money during sell-offs. For example, one of the funds we've recommended to members of the Fool's Champion Funds -- the investment service that I head up -- racked up a gain in excess of 50% while the market was tanking to the tune of more than 37% between 2000 and 2002.
And make no mistake: Funds -- at least the kind that we focus on -- can provide plenty of participation during bull runs, too. As a group, in fact, our recommendations have beaten the market by a double-digit margin.
Needle in the haystack
With funds, of course, it pays to be a snob. The vast majority of 'em can't keep pace with a dirt cheap index tracker like Vanguard 500 Index
No one metric is determinative, but cost is crucial, because every basis point of expense represents a higher hurdle that a money manager has to clear just to stay within spitting distance of his or her expense-free benchmark. And while it's an investor's after-tax return that ultimately matters most, getting attuned to tax efficiency is important when it comes to determining which kind of account (taxable or tax-favored) is the best holding pen for a pick. Managerial tenure is vital information, too: A fund can only be as strong as the honchos who are calling the shots now.
The Foolish bottom line
If you want to be a savvy investor -- not to mention a smiling one -- zeroing in on those three items can help narrow the universe of funds down to just those that are worth considering for your portfolio.
Which brings us back to where we began: Even investors of the "stock jock" persuasion can benefit from a sneak peek at the fund industry's best and brightest. When the kind of money managers who have made our grade make moves in their portfolios, that kind of information just might prove helpful when it comes to managing your portfolio. Champion Funds can help that cause. We go about the business of cherry-picking the industry's brightest prospects for our members. You can check out all of our picks and research with no risk -- click here for more information.
Join Champion Funds today, and the Fool's latest premium report -- The NEW Rule Makers: 5 Power Stocks You'll Never Want to Sell -- is yours free. You'll also have access to our latest special reports: The Challenge: ETFs vs. Mutual Funds and Add Kick to Your 401(k)! Just click here to snag the reports (which are yours to keep) along with a risk-free Champion Funds membership.
Shannon Zimmerman is the lead analyst for the Fool's Champion Funds newsletter service. He doesn't own any of the companies mentioned. Pfizer is an Inside Value recommendation. Akamai is a Rule Breakers recommendation. The Fool has a strict disclosure policy.