Celebrity hype bad reason to buy fund

Mutual funds aren't horses. You don't pick them by name, color or by the celebrity who is involved in the ownership group.

Yet two recent stories making headlines in the fund business make it clear that some people get distracted by irrelevant details. The two stories have a common moral, a lesson that amounts to "Keep your eye on the ball." The first news story involves the world's top cyclist, seven-time Tour de France champion Lance Armstrong, teaming with American Century Investments to create the LiveStrong funds.

The second story broke the news that the American funds had surpassed Fidelity to take the top spot in assets under management, a move which purportedly shifts the center of the mutual-fund universe from Boston to Los Angeles.

Both stories make for good conversation, but lousy investing.

American Century took an interesting step in riding tandem with Armstrong; it will open the LiveStrong funds in May.

The new funds will be designed to let investors cruise to their finish line with one fund, so that a 25-year-old investing in the 2045 product today will have an aggressive fund that grows conservative as the retirement target date approaches.

Plenty of life-cycle funds take that approach, so it's the tie to Armstrong that's unique.

That may make for compelling advertising, but it's no reason to invest in a fund.

Life-cycle funds are an acquired taste, and can be a great choice for someone who basically wants to let someone else make all of the investment decisions; they're not right for savvy investors who have built a portfolio and control their own asset allocation.

American Century is a good fund company and there is no reason to think that LiveStrong funds won't succeed. But there is also no reason to think that these will be the best funds ever within the genre.

The fund firm has to convince you that it can inspire your trust and confidence, and the affiliation with Armstrong really has nothing to do with that.

If the center of the fund world has moved 3,000-plus miles west of Boston — due among many reasons to the explosive growth of the American and PIMCO funds, coupled with events such as an asset decline at Putnam Investments — you're not seeing any significant change in the way the money is managed because of it.

You'll find outstanding fund firms in places like Memphis (Longleaf) or Salt Lake City (Wasatch), and they're not well run because of the quality of the local water supply, the barbecue or the nearby skiing.

In the end, investors should focus on things that matter, not on advertising, hype or any other outside influence.

Items that don't affect performance don't merit consideration.

Chuck Jaffe is senior columnist at MarketWatch. He can be reached at jaffe@marketwatch.com or

Box 70, Cohasset, MA 02025-0070.