Investing in stock and bond markets is risky business - this becomes clear each time the market swoons by 5%-10% or more in a very short time. Investors - whether they are retail or professional or managers of mutual funds - find their portfolios having been shaved significantly, and look for explanations where none can be found. However, the very best mutual fund managers understand that investing is risky, that markets will periodically go against them - and that it takes discipline and fortitude combined with excellent investing principles that will guide them and their funds to future success.

Our own investing recommendation is to use the best investment newsletters that are available for the stock portion of your portfolio - however, the second recommendation is to invest in mutual funds with the best mutual fund managers that you can find. Barrons, in a recent issue, highlighted their top hundred mutual fund managers - and studying those managers provides some insight into the type of fund manager you want managing your money.

Some of the key qualities of a successful mutual fund manager are:

1. Five or more years of experience at a fund - the longer the better: Experience counts, and when it comes to managing money in the market, it counts doubly. Most successful managers learn their craft as apprentices to previously successful managers, while a few test their ideas on their own portfolios first before deploying it on larger sums of money. It is useful to understand where the manager learnt their craft ("MBA at Harvard" is not enough!) and to check if they have successfully proven their ability to apply their skills.
2. Well thought-out long-term strategy for succeeding with plans for both bear and bull markets: A successful mutual fund manager must succeed when the markets favor them and when they go against them. The cumulative returns of any mutual fund are disproportionately affected by its losses - and thus it is important that these funds hold up well in adverse conditions.
3. Proof of ability to stick through thick and thin to the chosen strategy as opposed to following a shot-gun approach to success: In other words, you do not want your manager to switch strategies as soon as they see the markets go against them. There is a tendency to do so since bonuses and commissions are often tied to performance and total assets under management. Bear markets will affect both! But a manager who is chasing the latest hot market strategy will quickly erode your profits and leave you holding an empty portfolio.
4. Not chasing speculative investments or the investment of the day: Avoiding speculative investments helps keeps the mutual fund on a solid footing. This middle of the road approach is also the road to long term riches. Speculative situations make investing closer to gambling - avoid them, and make sure you avoid those mutual fund managers who use such investments in their portfolio management strategy.




5. Performance to date through a bull and a bear market: Last but not the least; do look at the performance of the mutual fund under consideration. Is it in the top quintile in its category? Has it kept up with its comparable index? Has it beaten the general market (S&P 500) over the last bull and bear market?

Giving careful consideration to these characteristics will bring you closer to a choice of mutual fund and fund manager for your investment needs.