Why is it that when the stock market sledding gets tough, newspapers and magazines trot out article after article on the "best places for cash" and "Top 10 money funds?" Money markets, CDs and the like are all the rage, yet for my money (and I do mean MY money), the focus should be on the "best stock funds for the rebound."

I'm thinking about this because of two unrelated incidents I heard about recently. In one, a wealthy investor monitoring a couple of simplistic metrics, including the 250-day moving average for the funds in his portfolio, decided that because his funds had fallen below this average, they must be sold. He went to cash, and of course missed the month-end rebound.

In another case, dating back to the market's first-quarter decline, an investor sold out, called Vanguard Brokerage, asked for a high-yielding CD, and planted her money there. Little did she know that the CD's backer, IndyMac Bank, was on the verge of being shuttered by the Feds. She got her money, of course, but at what cost in time, anxiety and, ultimately, her long-range investment objectives?

It's amazing to me that folks who say they are investors with a long-term focus can make moves like these on a "whim" and a prayer. Peter Lynch, the famed Fidelity stock-picker, was pretty succinct when he said, "The key to making money in stocks is not to get scared out of them." He's right.

Market-timing doesn't work. One of the loudest market-timers that I can think of (I'll call him Doug) not only has one of the worst investment track records around, but once went so far as to promise to show how he would turn a $500,000 investment that he claimed was his own money into a million dollars in just 365 days using market-timing strategies he called the path to "riskless wealth." When Doug's portfolio fell to $250,000 after a few months, all mention of riskless wealth and the million-dollar promise disappeared. But wouldn't you know it—with the markets in upheaval, Doug has reappeared, pitching more of that same snake oil packaged in a slightly different bottle.

The best investment strategy now is the same one we started the year with, and the one that's driven your returns and mine for the past 17-plus years: Buy funds run by top-notch money managers, mix them in a portfolio that has the risk characteristics and return objectives that match your own, and then watch them carefully while sitting on your hands, making changes at the margin as circumstances warrant.

And why all the incessant worry? I don't think a stock market that has fallen 10.2% (Total Stock Market's return through August) warrants making wholesale changes to a well-thought-out investment strategy. Real investors see this as an opportunity to pick up some bargains rather than an opportunity to run for cover. I believe several of the managers running funds my subscribers and I invest in are doing just that. Let them make the moves for us while we monitor their progress. I know index investors have lost a decade, but we haven't. And we didn't try to market-time our way to profits, either.

Vanguard Total World Stock Index (ticker symbol: VTWSX) is now trading. Tracking the FTSE All-World Index, a benchmark of a bit under 3,000 stocks in 47 countries, it's the first global stock index fund at Vanguard, coming head to head with Global Equity (VHGEX), Vanguard's actively managed global fund. Duane F. Kelly and Ryan E. Ludt will co-manage the new fund from within Vanguard's indexing shop.

Like many of the Vanguard index funds, Total World Stock Index comes complete with ETF shares (ticker symbol: VT). The fund's investor shares come with a 0.25% front-end load (Vanguard calls it a "purchase fee") and a 45-basis-point expense ratio, while the ETF has a 25-basis-point expense ratio.

As with any Vanguard index fund with a front-end load, if you're investing anything more than a token amount, it pays to go with the ETF unless you'll be adding lots of additional investments that will push up your brokerage costs. At a minimum of $3,000 to invest in the fund, you'll pay $7.50 in front-end loads. If, like me, you pay just $8 per brokerage transaction, you don't have to be investing much to make the ETF pay off.

Speaking of loads, Vanguard also cut the front-end and back-end loads on Emerging Markets Index (VWO) to 0.25%, or 25 basis points, from 50 basis points, making the fund a bit more competitive with its ETF sibling. Plus, they've taken the 25-basis point front-end load off of World ex-US Index (VEU).

Despite the low fees on the new Total World Stock Index, I'm not sure this is the best way to go for global diversification. For a review of why, check out my story on page 12 of the May issue of The Independent Adviser for Vanguard Investors.

Yesterday evening, I appeared on Nightly Business Report with Jim Lowell, editor of the Fidelity Investor newsletter and my partner at our asset management firm Adviser Investments.

We spoke to our host, Paul Kangas, about some of the best funds to invest in at Vanguard and Fidelity during these volatile times, as well as some of the recent changes at both companies. For example, Vanguard announced recently that CEO John Brennan will be replaced by William McNabb.

Videos of each day's program are archived at the Nightly Business Report Streaming Videos page. If you didn't catch last night's program, you can read the transcript of our conversation.

This Tuesday evening, Jim Lowell, my partner at our asset management firm Adviser Investments, and I will be appearing on Nightly Business Report. As you may know, Jim is also the editor of the Fidelity Investor newsletter. We'll be discussing how to manage fund investments at Vanguard and Fidelity during an economic slowdown with our host, Paul Kangas.

Please check your local public television station for the show's time. You can find out when the show airs and which channel it shows on in your local area at www.pbs.org/nbr. I hope you'll tune in.

February is often manager-musical-chairs month at Vanguard, and since I wrote about Earl McEvoy's retirement, Vanguard has announced more manager changes. Subscribers to my newsletter can read my full analysis on these management changes in the news section of my website, but here's an overview.

First, Vanguard ousted Grantham, Mayo, Van Otterloo, which manages some $150 billion in assets and is the home of noted perma-bear Jeremy Grantham. The quantitative group had originally been brought into Vanguard to run a piece of Explorer in the spring of 2000 (but wasn't handed a piece of the Small Company Growth Annuity until the fall), then were the founding managers of U.S. Value when it debuted in June 2000. Vanguard's own quantitative equity team will replace GMO.

The GMO firing raises, once again, the question of whether Vanguard's disclosures are adequate or accurate. In U.S. Value's September 2007 annual report, published in November, just three months ago, Vanguard's Board says that retaining GMO is "in the best interests of the fund and its shareholders." Could they have changed their tune so quickly as to turn around and fire GMO just a few months later?

Vanguard also announced that International Growth is adding a third manager—M&G Investment Management, which has run Precious Metals & Mining since its inception. The question we have to ask here is, will the addition of another management team turn it into an index-hugging foreign fund?

As I've always said, when it comes to mutual funds, you're not just buying a fund, you're hiring the manager. That's why monitoring changes in fund management and knowing the long-term track record of managers is one of my top priorities, and should be yours, too.

The news is out: Earl McEvoy, manager of the bond portion of Vanguard Wellesley Income Fund (VWINX) and lead manager of Vanguard High-Yield Corporate Fund (VWEHX) and Vanguard Long-Term Investment-Grade Fund (VWESX), will be retiring on June 30, 2008. You can read the full press release at businesswire.com.

Of course, this is no surprise to subscribers to The Independent Adviser for Vanguard Investors, as I notified them of the upcoming change in the latest FFSA Independent Guide to the Vanguard Funds.

Under McEvoy's leadership, High-Yield Corporate has been in a class by itself. While its higher-quality bias relative to other junk bond ("high yield") funds has caused it to lag at times, it holds up better in down markets, and the fund's methodology kept it from investing in any issues collateralized by subprime borrowers. But it's not a no-risk fund, and you'll pay a 1% back-end load that Vanguard calls a "redemption fee" if you sell shares held less than one year. McEvoy will be replaced by Michael L. Hong of Wellington Management on this fund.

As for Wellesley Income, it's been an exceptional offering for risk-averse income-oriented investors, though of course it can't compete when stocks are charging ahead of bonds. I don't expect many changes to result from McEvoy's retirement. His replacement, John Keogh, is a solid value stock manager with Wellington Management's full backing.

While McEvoy's departure is no cause for celebration, given his long and reliable tenure, I'm confident in Wellington Management's deep pool of talent, and expect to see little if any noticeable effect on the three funds' performance once the transition is complete.

Even so, it's important to know just who's running your fund, and that's why I keep a close eye on manager changes, as well as what managers are investing in their own funds, or as I like to say "eating their own cooking," and how much. And that's not to mention where the Vanguard directors are investing—for all Vanguard's talk about indexing, you might be surprised where their money actually goes. Of course, finding out is easy for subscribers to my newsletter. I do all the heavy lifting and report on manager and director holdings for all Vanguard funds each year. For the record, McEvoy had over $1 million of his own money invested in Wellesley as of Sept. 30, 2007, but held no shares of High-Yield Corporate or Long-Term Investment Grade.

As I've often told subscribers to The Independent Adviser for Vanguard Investors, the ETF business is booming, and Vanguard has taken every opportunity to grab its piece of the pie since it launched its first ETFs, then called "VIPERS," in 2001. Thanks to its success in the ETF business, it is once again the "nation's top-selling fund company," as Investment News put it:

Propelled by sales of its exchange traded funds, The Vanguard Group Inc. regained its status as the nation's top-selling fund company last year, edging past rival American Funds, which had been No. 1 since 2002.

Investors poured a net $76.2 billion into Malvern, Pa.-based Vanguard's stock, bond and ex-change traded funds last year, compared with $74.7 billion for American Funds, according to Boston's Financial Research Corp.

While there may not be much there for investors like you and me to be excited about, one thing is clear, and it's something I've told my subscribers for years: Vanguard is hands-down the best place to find low-cost mutual funds and ETFs. In fact, it's those low costs that often make the difference between outperformance and underperformance.

Vanguard's Australian operations are gaining steam, and like their U.S. counterparts, the Australian Vanguard team members are big proponents of index investing. But in the rush to develop investors' "indexing quotients" or, as Vanguard likes to put it, their IQs, the company's Plain Talk Library confuses rather than educates. In one online "test," my favorite question reads: "True or false. An index must hold all of the securities in a particular index."

You and I know the answer is "true." Of course an index must hold all the securities in an index. Duh! But because Vanguard meant to ask if an index fund must hold all the securities, the true answer is "false."

I'm assuming this is just some of that down-under humor, mate.

It's certainly been a difficult couple of weeks since the calendar turned to 2008 with the Dow index having fallen 9%, the S&P 500 index down 10% and the NASDAQ Composite down 12%. The fear on Wall Street, at least as implied by market action, suggests we are headed for an economic disaster. This simply is not the case.

Let's look at an example. IBM, following in Dupont and GE's footsteps, pre-reported a strong Q4 on Monday (a 24% increase in earnings per share over last year's Q4) and stocks rallied on the news. Remember that IBM sells deeply into the financial services industry, so a strong quarter in spite of the troubles in the banking sector should be seen as a good sign. Two, IBM is something of a bellwether of overall corporate spending. Again, a good sign.

So, what's the strategy here? Unless you want to try your hand at market-timing, which is a fool's errand, there isn't one. Here's why:

1. No one can tell where the bottom of a recession, or a stock market for that matter, will be.
2. The average recession lasts 11 months and generally occurs when stocks and/or interest rates are much higher than they have been in this cycle.
3. Yes, the Congress may come up with an attempt at a quick fix. While I don't think this will actually do anything short-term, it will help confidence.
4. Running to oil and gas, and maybe gold, is not necessarily a solution or a quick fix for your portfolio. A faltering economy or consumer could mean less demand for these commodities: Oil, which had a trade or two at the $100 per barrel level, is now trading below $90.
5. Cash looks great when everything else is falling, but it won't look so great the minute the markets turn around and you're stuck still earning a tiny yield, which, by the way, is going down as the Fed cuts rates.
6. REIT saw some great returns from 2000 through January 2007, and then over the past 11.5 months, they've lost almost one-third of the gains earned in the prior 7 years!
7. There's a short-term benefit to bonds, maybe, but with the 10-year yielding 3.6% or so, what's the return after taxes and inflation? When the stock market turns up—and it will turn up—a couple of decent days in the 2% range will more than make up for a year's interest on a 10-year Treasury.
8. Stocks are now officially on sale. Ever heard the expression "buy low and sell high?" This is "buy low" time.

Hang in there. And remember that you buy low and sell high, not the other way around.

MutualFundWire asked me for my latest take on Vanguard's three new ETFs. You can access the complete release here.