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Fund Spy

5 Great Core Funds for Contrarians

These funds remain excellent choices despite being out of favor recently.

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It’s often tempting for mutual fund investors to buy whatever has been doing well recently and to avoid funds that have lost money or lagged the market. Almost inevitably, funds that go on a hot streak attract lots of new assets, while investors tend to flee from funds going through a slump.

But while there’s some evidence that momentum investing can work in the short term (for example, see "Does Momentum Investing Work?" by my colleague Alex Bryan), chasing short-term performance is a fool’s game over the long run. The most successful long-term investors (including the great Warren Buffett) have gotten where they are by learning to ignore the market’s short-term fluctuations and by going against the crowd when it’s appropriate.

David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.