Do you suffer from portfolio envy? Do you see a stock such as fertilizer specialist Mosaic
Well, calm down. There's a reason you never found these stocks or recognized their potential: You don't spend most of each day studying the stock market. You don't scour annual reports and financial filings for a living. You don't crunch stock numbers regularly. You're a regular person with a regular life.
Fortunately, being a regular person with a regular life doesn't mean you're out of luck. You have options. These days, I increasingly rely on mutual funds, letting skilled professionals choose the most promising stocks they can find for my investments. Better still, these pros decide when to buy and when to sell, sparing me from having to keep up with lots of companies.
Look at the Fidelity Independence (FDFFX) fund, for example. According to Morningstar, it's one of the top mutual fund owners of Mosaic, and its market-beating five-year average annual return is 18%. Its recent top holdings also include Monsanto
The fund with the biggest chunk of MEMC Electronic Materials is American Funds Growth Fund of America A (AGTHX), with a 14%-plus average annual return over the past five years. It owns more than 2.5% of the company. The fund's top holdings recently included Oracle
Should you snap up shares of these funds as soon as you can get to your checkbook? Not necessarily. For one thing, the American Funds fund charges a 5.75% load.
Just because a fund owns a lot of shares in a super performer, don't assume its other holdings are similarly golden. You need to be picky when choosing funds. You want ones with low fees, run by smart managers with impressive track records and admirable investing philosophies. Ideally, you want no load fees and low turnover in the fund.
The majority of managed mutual funds out there actually underperform the market. So be choosy -- you want only the most promising funds you can find.
It is possible to find such funds. You can do so yourself, perhaps by starting at Morningstar.com and doing a lot of digging.
Another approach I recommend (because I do it myself): Check out our Motley Fool Champion Funds newsletter. It arrives each month laden with mutual fund recommendations and updates, and it educates you along the way. Its picks are beating the market 31% vs. 12%, on average, since the newsletter began. You can try it free for 30 days, when you'll have full access to all past issues. You can read about every recommendation in detail -- with no obligation.
This article was originally published on Dec. 4, 2007. It has been updated.