As the Fool's resident fund geek, I'm a man on a two-part mission. The lion's share of my time is spent combing the universe of mutual funds for those choice picks that have what it takes to beat the market (and then some) over the long haul. On that front, I favor cheap price tags, proven investment strategies, and experienced managers whose track records indicate that they understand how to ply their trade in up markets and down.
On the other hand ...
My job also involves ferreting out and exposing the fund industry's duds, which are often easy to spot. A fund with an expense ratio that hovers near the 2% mark and a manager who's only been on the scene since late last Tuesday is relatively easy to consign to the reject pile.
Sometimes, though, even funds that seem decent enough are really duds in disguise. Consider the case of Fidelity's world-famous Magellan, a large-cap fund whose top holdings included the likes of Google
Though Fidelity has recently taken steps to right this flagship, for many years the fund ran as a closet "index-hugger," closely tracking the S&P 500 in a way that made its seemingly reasonable expense ratio -- currently just 0.57% -- seem downright unreasonable to those in the know.
After all, if you want to invest in the S&P 500 -- which includes such market stalwarts as ExxonMobil
Crack the code
When it comes to spotting index-huggers, the most important tool in the analytical toolkit is R-Squared, a metric that allows you to gauge just how much of a fund's performance is due to movements in a given benchmark. Other secrets, however, are tougher to uncover -- and that's as true in the broader corporate world as it is in the mutual fund industry. Perhaps even more so.
With a goal of cracking that code and revealing some of the bigwigs' secrets, my colleague Dayana Yochim and I recently sat down for a candid and wide-ranging interview with Motley Fool co-founder Tom Gardner. Among other things, we chatted about recent corporate scandals, CEOs with short-term visions, and why serious investors ought to celebrate market downturns. (Really!)
Tom also weighed in on executive pay packages, what to do if your financial advisor won't answer all of your questions, and yep, you guessed it, the fund industry's peculiar knack for "selling you air."
Yours for the clicking
If you'd like to take a look at the full interview, all you have to do is click here. We've put it together as a downloadable (and absolutely free) PDF entitled 12 Investing Secrets Corporate America Doesn't Want You to Know About.
Catchy, no?
Our interview with Tom is just the first report in our new Master Your Money series, by the way, so stay tuned for future installments. In the meantime, click here to snag the interview -- and the inside scoop on what corporate America doesn't want you to know. But mum's the word, OK? We have more secrets to shake out before the fat-cats wise up.
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service. At the time of publication, he didn't own any of the securities mentioned above. Johnson & Johnson is a Motley Fool Income Investor recommendation. You can check out the Fool's strict disclosure policy by clicking right here.
