Consider mutual fund flows, which measure how much money investors are putting into or taking out of different types of funds. Around the turn of the millennium, on a net basis, investors were fleeing safe but ho-hum bond funds for the raging returns of stock funds, which had been driven to record highs by dot-coms and other hot '90s success stories.
The result? Third-degree burns for those who ignored valuation considerations and plunged into stocks in the year 2000.
Fast-forward to today and a situation that's almost the exact opposite. The 2008 onset of the credit crisis prompted a mass flight from stocks of all stripes, at any price. Equity funds stopped hemorrhaging in 2009 and early 2010, but fund flows to stocks remain well below normal.
Fixed-income securities, meanwhile, are all the rage--despite the paltry rates on offer. People think of Treasuries as a risk-free return. Today, however, they're more like a return-free risk. Did the crowd make the right call this time around? I doubt it.
If you want to own stocks--and you should--you want Morningstar StockInvestor. Our strategy works, and we've got the real-world results to prove it.
As editor of Morningstar StockInvestor, I do more than write about investing; I manage two real-money portfolios that put our strategy to the test. Fittingly dubbed the Tortoise and Hare, these portfolios have achieved a combined cumulative total return of 62.7% (as of Aug. 31, 2010) since their June 2001 launch. That's well ahead of the S&P 500's 3.0% return over the same period. It's also better than the returns of 98.9% of large-cap blend mutual funds since inception, while experiencing below average volatility (five-year beta = 0.8).
How do we do it? It's actually quite simple. We buy high-quality businesses, household names with wide economic moats like Berkshire Hathaway BRK.B, Coca-Cola KO, and MasterCard MA. But we buy them only when they're trading at a discount to our estimate of their intrinsic value.
How do we figure that out? We do our homework. Each stock we're considering is put through a rigorous valuation exercise. If it passes, we purchase. If it doesn't, we don't. It's a long-term perspective in a short-term world. And it makes a world of difference.
Put Morningstar StockInvestor to the Test
I'm very proud of the results Morningstar StockInvestor has achieved. I'm equally confident that you'll be proud of the results you achieve.
As an independent investor, you know that information is the key to success. Not hot stock picks or trendy forecasting, but reasoned, researched, truly objective investment insights that focus on the fundamentals. The kind Morningstar StockInvestor delivers.
Every issue is dedicated to helping you understand what the highest-quality companies in the world are really worth. We show you not just what to buy, but when to buy--and when to sell. But don't take our word for it. See for yourself how well our results stack up to those of every other investing newsletter. Try a risk-free Morningstar StockInvestor subscription. If you decide it's not for you, simply cancel within 30 days. We'll cheerfully refund every penny.