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Selecting a Mutual Fund as an Investment Strategy

As an investment strategy there are over 21,000 mutual funds and portfolios available in Canada. Most of these mutual funds are junk, guaranteed to return less than the market. Selecting a good one is a challenge! It’s no wonder that most people are looking to invest in Index Funds which perform better than more than 95% of these “professionally managed” mutual funds.

Performance over time tells the story

But, there’s a belief out there that funds cannot outperform the market. That’s simply not true!

Warren Buffett has been running Berkshire Hathaway since 1964. When he created the company, a single stock would have cost $10. Today (01/01/2020) that share is worth $340,210.00. The annualized compound return on this share is 20.9%, MUCH higher than the market index. In fact this return is almost twice the level of return on the S&P500 over the same time frame.

The question for each of us to consider is : Is Warren Buffett doing something different than the average mutual fund manager?

In short…. yes!!

What is Berkshire Hathaway doing?

Buffett learned stock picking from studying with Ben Graham at Columbia University. Many of the great managers at the start of the mutual fund industry also studied under Graham. Most of these performed well – which is why the fund industry has grown so big!

But now, the evolving industry is using the good reputation of a once great industry to drive assets under administration (which drives THEIR profitability), without regard to the performance of your investment.

So, how do you find a great fund manager?

The attributes of a good fund are a “Buy & Hold” strategy. Investment fund managers find great companies selling at a discount to value, and hold those companies for a long time. That is the exact strategy followed by Warren Buffett!

Even better, look for an investment management company whose culture fully integrates this methodology, without creating superstar managers. Superstars’ performance is not repeatable once they leave the fund. I’ve seen too many of these star funds go badly once the founder departed – think of the Templeton Growth Fund, Cundill Value Fund, etc…

Do some research, and you’ll find great funds! In my personal investment strategy, one of the funds I now own has returned over 24% a year for 11 years! That’s performance!

Want to talk, with no sales pressure (I’m not licensed and can’t even recommend anything), then connect with me at https://cadillacwealthmgmt.com

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