"How many investors have you met that are truly effective long-term investors?" asks Robert Weller, co-head of behavioral finance equity at Sterling Capital Management, which has started using behavioral research to guide some of its equity funds. "The underlying data shows investors never fully participate in the markets' gains. They sell at the wrong time and buy at the wrong time."
Stock index funds are a way to at least match the long-term performance of equities. But Rogers says that for the long-term investor, a mix of income and equity funds provides steadier returns than pure equity funds. He also recommends putting long-term savings on automatic deduction plans so you aren't tempted to make an untimely pullout. Target-date funds, which are set to alter their holdings over time to match a person's needs as they move closer to retirement, usually provide appropriate diversification that minimizes risks and provides steady long-term returns.
"Check under the hood. Each target fund is different," Rogers says. "See how it matches your goals. You could even use one for a college fund, depending on how it is set up." And once you've taken time to study what the fund offers, he says, stay invested so you get the time value of the money you've saved.