The Remarkable Gap Between Winners and Losers
Put a little time into your fund selection, and you'll be on the right side of the 'St. Hubbins line.'
Too often, people assume that one fund is as good as the next. Or they put in the effort to pick their stock funds but buy their bond funds from whichever fund company is most convenient. But that's leaving a lot of money on the table. As the immortal Spinal Tap lead singer David St. Hubbins said, "It's such a fine line between stupid and clever." Put a little time into your fund selection, and you'll be on the right side of the St. Hubbins line.
It's amazing to me how people will spend way more time researching fun expenditures, like cars and plasma TVs, than they will on developing an investment plan and selecting their investments. Sure, it isn't as fun, but it's your retirement, your house, and your kids' college education!
Let's look at why it's worth a little effort. It's not too hard to pick funds that will do a little better than average, and it takes only a little more work to upgrade from there so that you've meaningfully improved your chances of returns that are well above average while reducing your chances of lousy performance. Of course, there's no foolproof method of predicting the top-performing fund over the next 10 years, but there are dependable methods to select funds that should earn strong returns while limiting cellar-dwellers.