No Load Fund Investing: How Important is a Fund Manager?

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This question is like a two-edged sword, and I am bound to step on somebody’s toes. I think the most important issue in answering that question is what type of investment approach you are using.

If you are one of those Buy-and-Hope followers and always in the market, then, by all means, you want a fund manager with a good track record. Because you hope that he has a way of bailing you out during times of market turmoil.

Dream on! When a bear market hits, such as we’ve seen from 2000 – 2003, all equity funds (and others) tend to go down with utter disrespect to the fund manager in charge.

If, however, you use a trend tracking approach, such as I advocate, then the fund manager is not that important. When you analyze funds based on their momentum figures, a fund manager’s strong performance will be reflected in the underlying price of the fund. It will move up in the (momentum) ranking food chain making it a candidate for a buy.

The bottom line is, whether a manager leaves a fund or not, has no effect on my decision making process. So, when I read articles in MarketWatch that report a change in fund management and ask the investors to be patient and give the new guy a chance, I have to chuckle and wonder who really wrote that piece.

As I said above, in bear markets all equity funds go down. However, that’s not entirely true. One of my readers pointed out a no load fund, which bucked the trend and put on a super performance. In tomorrow’s post, I’ll tell your more about it.

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