Saturday, January 20, 2007

Importance of Wise Choices of Mutual Funds

One choice, 35 years, two outcomes.

Can you look at the chart above and get it? Can you see the cost to you of a lifetime of underperforming investments? What you see in the chart is two outcomes, one of which is much, much better.

This is not intended to kick Fidelity Contrafund around. Contrafund is certainly better than many other funds that are out there. But you have a strong interest in getting it right. Getting it right with excellence.

How not to get it right: If you watch TV to learn how to invest, all you will hear is some character yelling and jumping up and down making simian sounds telling you how to trade too much in going after short-term gains. And I am not referring to the commercials! Or you may see some less-diverting version of the same thing. A few exceptional programs exist. If you get lucky and make some short-term gains, then Speaker of the House Rep. Nancy Pelosi will want to tax them away from you. (Sorry, Madam Speaker!) That isn't investing, it is speculating on the stock price. Investing is a bigger, better thing, that even regular people can do well. So, what is real investing? Rummage around in the old posts here. Subscribe to the RSS feed. Come back for more. Bring a friend. We'll get there.

Parting thought: The really stunning thing isn't on the chart. The evidence is in and the research has been done. There is something even more important than what fund you choose. It is which and how many asset classes your portfolio holdings include and how you allocate your money among them. Then, you flesh out the portfolio with excellent holdings. That's getting into investing. But some things come even before those. [mostly involving the customization for each client's needs, and they can't all be dealt with in one blog post.]

Post edited 1/21/07 to correct Ms. Pelosi's title. My mistake. And to add the last few bracketed words.

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