How to Choose a Winning Fund Manager

Wall Street firms exist for one simple purpose: to sell you whatever you're willing to buy. On that score, dealing with them is no different than doing business with the car dealer down the street. That shiny new car may or may not be in your best interests, but the car salesperson will sell it to you regardless.

So if Wall Street exists to sell anything and everything -- from speculative initial public offerings to mutual funds with spiraling (and often unnecessary) expenses -- how do individual investors protect themselves?

Picking a Winner

One way is to avoid doing too much. Of course, it's important to do research, read a lot and stay informed, but you don't need to keep one eye on the ticker and one on your portfolio every moment of the trading day. As an investor, your overriding charge is to allocate capital well. The best way to accomplish this goal, with the least amount of stress and a minimal amount of work, is to locate and establish relationships with a handful of great money managers. Then all you have to do is let them do their job.

I'll use a business metaphor to illustrate my point. You, the investor, are assuming the role of chairman of the board. Day-to-day operational matters shouldn't fall in your hands; instead, they should be delegated to your corporate officers; i.e., money managers. Too many investors try to fill every role, from chairman to CEO to CFO. They make all of the decisions, take on all of the stress, and compete toe to toe with the best minds in money management, even though they have a fraction of the expertise and a limited amount of time.

Some "micro-managers" are indeed successful in their businesses, leaning over the shoulders of subordinates, making any and all decisions. But for many investors, that energy would be better spent in finding a few great minds and leaving them alone to accomplish their work.

Best of the Bunch

Among my fellow mutual fund managers, here are three of the smarter ones and their top five holdings. (As you may already know, I manage a no-load mutual fund called The Turnaround Fund (TM). In the interest of full disclosure, The Turnaround Fund holds long positions in three of the stocks mentioned below, which will be appropriately noted at the end of each page.)

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At time of publication, Alsin and/or ACM and The Turnaround Fund were long H&R Block, Safeway and AON, although holdings can change at any time.

Arne Alsin is the founder and principal of Alsin Capital Management, an Oregon-based investment advisor and portfolio manager of The Turnaround Fund, a no-load mutual fund. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback and invites you to send it to [e-mail]. Click here to receive Arne's latest favorite stock picks from his newsletter, The Turnaround Report.