Be a Successful Mutual Fund Investor

Being a successful mutual fund investor requires attaining and applying the appropriate skills and knowledge. If you make good use of the content of this site, you will acquire that knowledge and, in the process, develop the basic skills required to at least be modestly successful. Over time, as your knowledge and self confidence grow, you should develop the skills required to be very successful.

Success is a relative term, but in general it means achieving your goals, which may be lofty or modest. However, when it comes to mutual fund investing, being average is far from being successful. To be even modestly successful you must be well above average, as the average return for mutual fund investors as a group is so low as to not warrant the risks inherent to investing. Indeed, the average return realized by mutual fund investors is way below the rate of return earned by mutual funds. "Huh?", you say.

Fact: Although historical mutual fund returns are well in excess of T-bill rates, the rate of return realized by the average mutual fund investor is only slightly greater than that which could have been earned by holding T-bills!

Why do mutual fund investor do so poorly on average? Because many mutual fund investors have no plan that defines the appropriate composition of their portfolio, many chase the current hot funds (a loser's game) and many buy or sell when they should simply hold. Mutual fund investors making these mistakes earn below-average returns and drive the group average down.

Fact: Studies have shown that at least 90% of portfolio performance is attributable to asset allocation. The balance is attributable to the selection of individual assets. That's why having a plan that defines the appropriate composition of your portfolio is crucial to your success as an investor.

Given those two facts, it should be obvious that being a successful mutual fund investor hinges on constructing a well-designed portfolio, populating it with good mutual funds and maintaining it according to the plan that is implicit in its design. Doing so should ensure that your long-term average return is well above the pitiful rate realized by the average mutual fund investor.

You'll learn on this site how to be a successful mutual fund investor. Remember, to put the average where it is, there is an above-average investor to offset every below-average investor. To really be successful, you must be deep into above-average territory. You can get there with a well-designed portfolio that is properly maintained, and the information you need to do that can be found on this site.

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