I don't need to tell you that this is a difficult market in which to make money. And I certainly don't need to remind you how painful it is to lose money.
But even with the S&P 500 down 12% in the first half of the year, and the average mutual fund down 9.7% during the same period, there are investments making many investors rich.
Oh yeah?
This news probably comes as a huge surprise to shareholders of American International Group (NYSE: AIG), UnitedHealth Group (NYSE: UNH), Thomson Reuters (Nasdaq: TRIN) -- all of which are down more than 50% year-to-date.
Or maybe, like me, you're suffering from seeing the red of American Eagle Outfitters (NYSE: AEO) in your portfolio -- a retailer whose stock lost more than 30% in the first half of the year.
"The market will rebound" is supposed to be a comfort -- but you and I both know there's no consolation for losing money.
Less money equals less fun
But there are some investors undoubtedly confused by all this bear market talk. Year-to-date, their money has beaten the market by nearly 20 percentage points, and over the last 12 months, they're up a whopping 48%!
Who are these lucky folks?
Investors who got in on CGM Focus (CGMFX), a mutual fund we recommended to subscribers of our Champion Funds newsletter back in May 2006. The fund met all of the key criteria we look for in mutual funds:
- Low expenses
- Long managerial tenure
- Long-term market-beating performance
In addition to passing this fundamental litmus test, we recognized the ability of manager Ken Heebner to couple an aggressive offense with a sturdy defense -- even with a concentrated portfolio of roughly 25 stocks, which currently includes PotashCorp (NYSE: POT), Gerdau (NYSE: GGB) and Mosaic (NYSE: MOS) -- all of which are up more than 45% year-to-date.
Bullish on bears
But how did we know he was ready to profit if the market turned south?
We closely examined his previous bear-market experience -- and were impressed by his 2001 performance, when he beat the S&P 500 by 60 percentage points. This simple analysis is often overlooked by investors, who are instead lured by one- to three-year outperformance.
After all, having confidence that your money will grow during both bull and bear markets is essential for long-term investors.
Taking the lessons to the bank
To judge a fund's management, it's important to look at their performance in good times and bad. A manager who posts big gains during bull markets, only to lose it all when the market takes a dive, won't help your portfolio in the long run.
Outstanding performance in bear markets and bull is one of the things we look for at Motley Fool Champion Funds -- and we've found a number of market-beating mutual funds. Our recommended funds, as a group, are currently beating the S&P 500 by more than 20 percentage points.
To see what other funds meet our criteria -- and outperformed the last bear market -- take a 30-day free trial. Click here to get started -- there's no obligation to subscribe.
Adam J. Wiederman owns shares of American Eagle Outfitters, which is a Stock Advisor recommendation. The Motley Fool also owns shares of American Eagle Outfitters. UnitedHealth Group is a Stock Advisor and Inside Value recommendation. CGM Focus is a Champion Funds recommendation. The Fool's strict disclosure policy is here.
