Can 90 Million Investors Be Wrong?

Can 90 Million Investors Be Wrong? By Shannon Zimmerman (TMF Zman) Advisor, Motley Fool Champion Funds Quick: Name the investment vehicle that appears in the portfolios of more than 90 million Americans. If you said "mutual funds," give yourself a gold star and head to the front of your cubicle: You are correct! The "wisdom" of crowds Trouble is, as convenient as they are, the vast majority of mutual funds are market-lagging dogs. With more than 7,000 of the suckers vying for your hard-earned savings, the trouble lies in separating the fund industry's proverbial wheat from its chaff. And let's not even talk (at least not yet) about zeroing in on just those select few that make the cut and make a good match for your investing timeline and tolerance for risk. In previous commentaries, I've highlighted some of the salient details that you should home in on when making fund investment decisions, including those you make when picking funds from your company's 401(k) plan. Among other things, you should look for low price tags -- the average stock fund will ding you roughly 1.4% for the "privilege" of investing in it -- and seasoned management teams with lengthy track records of success. Puzzling pieces Still, even after you've identified funds that make the grade, there remains the all-important matter of cherry-picking from among the worthies and assembling them into a portfolio that's right for your investing profile. Young and/or aggressive investors, for example, may be completely content with a lineup that provides hefty exposure to racy growth stocks such as Comcast (Nasdaq: CMCSA), Genentech (NYSE: DNA), Research In Motion (Nasdaq: RIMM), and eBay (Nasdaq: EBAY) -- all of which currently sport earnings growth estimates in excess of 20% and, not coincidentally, price-to-earnings (P/E) ratios that reside in the stock market's nosebleed section. Conservative types, meanwhile, may be perfectly content with market stalwarts such as Anheuser-Busch (NYSE: BUD), Kraft Foods (NYSE: KFT), and Citigroup (NYSE: C), each of which currently trades at a P/E discount relative to the broader market and its typical industry rival. The Foolish bottom line Most of us, however, fall somewhere between those extremes, and Motley Fool Champion Funds -- the Fool newsletter service that I head up -- provides Aggressive, Moderate, and Conservative model portfolios for just that reason. Our models are meant as asset-allocation starting points, portfolios that you can tweak and tailor to your heart's -- and your nest egg's -- content. Indeed, in order to aid and abet that cause, we also highlight one pick per month that ranks among the fund industry's best and brightest in terms of its forward-looking prospects. And so far, so good: Our list of recommended funds has outperformed