Time-Tested Strategies for Picking Funds

Reader Robert Zelmin asked me a question that I hear quite a bit: When I list stocks and funds for a portfolio, "Why did you pick those particular ones?"

This question means it's high time to discuss my selection process for investing. I have said some of these things before, but a summary of my basic guidelines is worth putting together for this column:

Classic asset allocation that requires a certain percentage in each major asset class does not work for me. I know that research proves over a long period of time -- typically 20 to 30 years -- it works very well. However, to always intentionally have money positioned in asset classes that are out of favor (as well as those in favor) makes no sense to me. I resist a strategy that is a formulaic approach to investing in mutual funds. Any formula that stretches my patience and my clients' beyond a reasonable limit gets rejected.

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