Long-Haul Investing

But if you are confident that your fund managers are better than the average, then pay no attention to one quarter or even one year's performance. Over short periods, the average investor may bid up some shares way beyond their real value and sell others for much less than they're worth.

During that period, your manager will "underperform." But over time, truth and value will out.

Look at Krispy Kreme (KKD Quote) a few years ago. Anyone who wasn't on board when it skyrocketed looked like a fool. Then the dough hit the fan. For that matter, look at any stock chart. A company that was apparently "worth" $15 a share in May is miraculously "worth" $30 six months later -- or vice versa.

When it comes to investment horizons, Warren Buffett put it best. The stock market, he said once, is a remarkable mechanism for transferring wealth "from the active to the patient."

The tortoise and the hare.

Get-rich-quick schemes usually turn out to be get-poor-quick schemes. Investment, like winemaking, takes time. And if you just want to bet on red because it's come up three times in a row, go to Foxwoods and head for the roulette table.

The good news is that successful investment isn't harder than it sounds: It's easier than it sounds. You just have to cut out all the noise about "hot hands" and funds "on a roll" and ignore your lucky neighbor who happened to make a killing in a penny stock.

If I were forced to invest only on the basis of the last few years' performance, I'd rather invest in the types of funds that had done worst, not those that had done best. Asset classes swing in and out of fashion. Who wanted to buy precious metals funds in 1999?

Nobody. Everybody wanted ... technology.

There are no prizes for guessing which funds have done the best since then, and which have done the worst.