There are many truisms in the investment business and one of them you always hear is to check out the management.

Does it really mean anything?

All brokers will tell you when touting a mutual fund that they have an excellent fund manager? Shucks, that’s easy to find out, but don’t ask Morningstar. I don’t think they have ever seen any mutual fund that didn’t have “excellent” management.

Oh, and I can no longer rely on Barron’s. The greatest financial newspaper of them all (that’s what ‘everybody’ says) had the front cover of their weekly paper last year proudly announcing “HE’S BACK”. Who? Some guy whose fund had not quite rallied back 50% after losing 80% of customers funds in 2008.

Good gosh, Gertie, how do I find a fund with ‘good’ management?

It is really pretty easy, but don’t expect any help from a broker and I am suspect of most financial planners.

One word will tell you – PERFORMANCE.

You must understand that fund managers are paid by the amount of money in the fund, not by how much money they make for their investors. If the investor lost money in 2008 the fund manager in almost every case didn’t have a pay cut.

There are many web sites you may search on the Internet that will list mutual funds by the investment return for various periods of time such as 3 months, 6 months, 9 months and 12 months. And keep the fund manager’s hand out of your pocket. Buy only no load funds. That means no commission and be sure you are not required to keep the money in the account for more than 90 days without a penalty.

No load funds are as good and in many cases better than load funds especially when the commission is factored in.

Let me say something in defense of some of these fund managers. Many are working with a charter that requires them to be fully invested at all times. During the humongous break in 2008 there were hardly ANY stocks that did not go down. Then why not have customer money in cash? Cash is a position that most of them never heard of.

Just because the fund manager is stuck in a bad place doesn’t mean you also have to be. SELL. That’s another word brokers don’t know about. Unless you learn it you will be caught in the next downturn. There will be one. They occur regularly and you must learn to recognize them.

The secret of the stock market is not buying. It is selling. History has shown that every famous analyst made his mark by telling when to sell.

You don’t have to know any fund manager by name. The performance of the fund will tell who is the best. These managers run hot and cold.

Buy the hot fund that is going up. Sell when the fund manager turns cold.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.