How to find a mutual fund that you can grow old with

You should never fall in love with an investment, but making a long-term commitment can be a good thing.

This week, my wife, Susan, and I will celebrate our 25th wedding anniversary. Besides reinforcing the fact that Susan is the most patient and understanding woman in America, the quarter-century milestone has been a good reminder that long-term relationships worth having require the shared vision to go through good and bad times.

That's as true for mutual funds as it is for spouses; the typical investor is making a long-term commitment that, in the end, may be one of the longest relationships they'll have in a lifetime. That's why it's safe to say that the ideal mutual fund would be one you could have and hold, in sickness and health, in good times and bad, for as long as you live.

For an investor looking to buy in for the long haul, you can see a fund's "marriage potential" in a few key traits. Before tying the knot with any fund -- but especially a core holding -- be sure to consider these points:

• Family: In both marriage and mutual funds, you don't just marry someone, you get the entire family. Planning for a long holding period means there is a good chance you will live through a manager change and will face the potential for a crazy brother-in-law to ruin your life. Some fund firms have a "deep bench" of managers, with someone always prepared to step into the void, while others are run by the fund's namesake and have no real Plan B in place.

At the very least, see if the firm has a history of handling management turnover smoothly, because if they can't handle change without a drop-off in performance, you'll find it hard to stay married to the fund when conditions change in the future.

• Fidelity (and I don't mean the fund company): If a fund is supposed to have a defined role within your portfolio, it must stay true to that objective. If you wake up five or 10 years down the road and your small-cap fund has strayed into large stocks that overlap your other holdings, you should feel betrayed and want a breakup.

• True love: People who chase performance or buy recent chart-toppers are marrying for money; long-term investors want more.

To build a long-term relationship with an investment, you must avoid the quick pickups and crushes that create initial attraction but then wear off. Funds that are the hot style, the "next big thing" or that have flash-in-the-pan results are hard to stick with when they're out of favor with the market; no matter how badly you want to diversify, the volatility will make them hard to hang on to when the market is against them.

Long-term investors want consistent long-term performance, avoiding the showy highs and sidestepping the absolute lows, rather than forcing shareholders to endure the emotions of the volatility roller coaster.

• Character, stability and ambition: Common goals and ideals are a cornerstone of a successful fund relationship. If you and the fund don't share the same goals, or the ideals on how to achieve those results, it is a mismatch. Likewise, the fund's character -- from index fund to gunslinging stock-picker -- must be sufficiently appealing to build your conviction to let things ride.

Stability matters. Check a fund's past volatility: If you can't stomach a repeat of its worst year, you're mismatched.

Charles A. Jaffe is senior columnist at MarketWatch. He can be reached at or at Box 70, Cohasset, MA 02025-0070.