The Ten Percent Solution

 

who made a killing in mutual funds.' That type of thing. But all mutual funds are not created equal. Some I like; some I don't.

"The key is the manager. You're buying professional money management and there can be as big a difference between two professional money managers as there can be between two professional quarterbacks. If I asked you, 'Who do you want on your team, our not-so-favorite Scott Mitchell or Brett Favre?' I feel certain you'd all answer the latter. When you're selecting a fund, find the Favre of money management."

"How do we do that?"

"If you were assigned to select the best QB in the NFL but didn't follow football, where would you start? You'd look at statistics, of course. Who is the highest-rated passer? Who's the most consistent? Has he been good for just one year, or has he proven he can do it year after year? When times are tough and his team is struggling, does he maintain a high level of play or drop off badly? Once you had studied the statistics, you would read some articles and talk to people in the know. What are the experts' opinions? Do they jibe with your findings?

"It's no different when you're looking for a good mutual fund. Assess past records. They don't guarantee future results, but they sure as heck are a good indication of the manager's abilities. What's the five-year average return? Ten-year? Fifteen-year? Does the fund perform consistently, or is it way up one year and way down the next? How does it fare during the bad times? Some funds have excellent records during tough times.

"Do some reading! Money, Forbes, Worth, Kiplinger's, and SmartMoney magazines do tremendous jobs monitoring