You know that being a successful investor requires patience. “Most investors give up too soon and sell at the bottom,” says Rajat Jain, a senior investment analyst at Litman Gregory.
But even if you plan to stick around for, say, a decade or longer, there are no guarantees that your fund managers will too. Nearly three out of four stock portfolios are led by managers who have been at the helm for under a decade, according to Morningstar.
Choose bands over solo artists. Forget searching for the next Peter Lynch or Bill Miller or Joel Tillinghast. Instead focus on funds led by a strong team of managers that, if necessary, can fill in for departing talent.
How can you find them? For guidance with the MONEY 50, we look to Morningstar’s “stewardship ratings,” which grade fund groups on qualities such as corporate culture, investment process, and manager tenure. This helped identify funds such as Dodge & Cox Stock
, which is run by an eight-member investment team with an average tenure at Dodge & Cox of 23 years.
To be sure, experience is no guarantee of future performance. But mutual fund companies with an average manager tenure of more than 15 years generally outpace those with shorter tenures, says Bridget Hughes, a research director at Morningstar. Over the past 15 years the Dodge & Cox Stock Fund has beaten more than 90% of its peers.