Before you invest a penny in a mutual fund, you should ask yourself a big question: Do you think you can beat the market?

It's not as dumb as it may sound. Given enough time, most professional money managers don't. (That's a little secret your broker, and your fund managers, don't tell you very often. I can't imagine why.)

A lot of people argue the stock market is so efficient at setting the right price for each stock that trying to get an edge is for suckers. If you buy that argument, then just invest in low-cost index funds, like the ( VTSSX) Vanguard Total Stock Market Index or State Street's exchange-traded Standard & Poor's Depositary Receipts ( SPY), and leave them alone. They'll follow the overall market, and they will save you a ton on fees.

It's not a bad strategy. It's better than the one most people are using right now.

But I don't buy it completely, for the simple reason I have seen Wall Street do too many stupid things too often. Betting against it at the right moments has done well for me and my readers.

I believe you can do better than just holding an index fund. But you have to know what you're doing. In a nutshell: You should understand that you're betting that your fund manager is wiser, and smarter, than Wall Street. Not luckier. Not more fashionable. Wiser, and smarter.

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