Mutual Funds: Fund Managers

Allusions to sports parallels often seep their way into discussions of financial matters, but there probably isn't a comparison from the sports world apt enough to convey the importance of a fund manager to the success of a fund.

But here's an attempt: Think of the fund manager as playing the roles of both superstar hoops coach Phil Jackson and superstar player Shaquille O'Neal. The manager, usually along with analysts, has to draw up the investment game plan and research the securities that meet the fund's goals (the Phil Jackson part). The manager is also the point man that makes the moves into and out of stocks (the O'Neal part). And when a manager is a star performer, he or she can draw hordes of fans by virtue of the marquee status.

For investors, a fund manager's long-term performance should be a major factor in deciding which fund to choose. Whatever type of fund you're looking for (value, technology, small-cap fund), the criteria for choosing a manager doesn't change: The best fund managers are the ones whose funds have consistently outperformed those of their peers over several years. Another key point: If you're choosing a fund with a special focus, say one of the many Internet funds that has popped up in recent years, it's best to pick a manager who has achieved success within that arena, and not a Johnny-dot-com-lately who was running a value fund six months ago. ...