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Sensible Mutual Fund Investing for the Stock Picker

Posted on: Thursday, March 7, 2013

While there is a certain degree of disagreement about the best methodologies and approaches that individuals should utilize in order to build a successful portfolio, there is little disagreement (at least from experts in the mainstream) that stocks should be a major component of just about any investing plan.

No matter what your age or risk tolerance or level of investing experience or goals or education, investing in stocks is usually one of the smartest moves that you can make with your hard-earned money.

But many people find that picking individual stocks is “too complicated,” or “too risky,” or “too time-consuming.” But nowhere is it written that investing in the stock market has to be accomplished by investing directly in stocks. That’s why modern mutual funds were invested in the first place, way back in 1924 ― to help individuals to invest in the stock market without having to become “stock investors.” And that’s why the Mutual Fund Informer was developed, as well ― to help individuals who want to invest smartly without having to become stock analysts.

I must report, however, that I and the rest of the Mutual Fund Informer team come to mutual funds from the perspective of stock investors first. In a few months I will celebrate twenty consecutive years of being a member of an investment club (although not a single club, but a succession of four different clubs, sometimes two at the same time). Those clubs have all shared a long-term approach to growth stock investing, and I’ve honed my own skills at screening and analyzing stocks and managing equity portfolios as an investment club member.

When it’s come time for me to select mutual funds for my own IRA and 401(k) and similar accounts (where stocks were not available), my experience with stocks has informed my fund-picking. I want mutual funds that share the same objectives that I use in my stock-picking. I want fund managers who share my preference for investing in high quality companies. I seek out funds that emphasize growth over value and income. In short, I like mutual funds that invest as if I were the manager.

The non-profit investment education organization BetterInvesting shares this belief, as well, evident in the deployment of their online mutual fund analysis and comparison tools. The Mutual Fund Informer and BetterInvesting share common ground, placing a premium on the mutual funds that invest in well-run companies that are selling at reasonable prices. We both like fund managers who invest customers’ monies for the long-term, not seeking near-term gains. We appreciate managers who concentrate their assets in a relatively few number of companies, instead of employing a scattershot approach to stock selection.

In short, we like to select mutual funds from the perspective of stock investors. And if you don’t want to become a stock investor yourself, that’s okay! Just follow our choices and process and you’ll hopefully pick up a few pointers about the ins and outs of stock selection along the way.