Double Your Money With Funds

Finding solid, growing companies isn't rocket science. Many terrific companies are all around you, and every now and then, they'll trade at reasonably attractive prices.

Some stocks, as you probably know, can perform phenomenally well, even in unexciting industries such as retail or beverages. Consider Chico's FAS, for example, which has grown at an average annual rate of more than 52% during the past decade, enough to turn $5,000 into more than $300,000. Drink maker Hansen Natural gained an average of 70% each year in that same period, and Best Buy (NYSE:BBY) grew by 41% annually, on average. These are, admittedly, extreme examples, and few people were aware of these firms a decade ago.

You don't have to find small, esoteric companies to do well, though. Urban Outfitters, for example, has increased in value nearly eightfold over the past decade, at an average annual rate of 24%, while Sunoco has grown by an average of 22% in the same period, as has Target.

But if you're not confident of your stock-picking abilities, you don't have to go beyond your comfort zone to find great investments.

Consider funds
You'll find more than 7,000 mutual funds out there, and yes, many of them stink.

But there are also plenty of top-notch funds with smart managers, reasonable fees, and solid track records. Don't think of opting for mutual funds as any kind of capitulation. I've recently been moving big chunks of my own nest egg into mutual funds, and it's not because I'm throwing in the towel on my hopes for high returns. It's more a matter of realizing that there are people out there who can make my money grow faster than I can on my own.

Consider the 10-year average annual return of these mutual funds:

See? Some funds out there do trump the returns of strong stock performers such as Urban Outfitters, Sunoco, and Target over the same time period. And all it takes is an average annual return of 14.9% for five years to double your money.

So should you snap up shares of the above funds? Please don't. For one thing, some are closed to new investors. You should also research any fund before investing. Check to see how steep its fees are. Read up on the managers, and make sure they've been in place for at least a few years. Ideally, they should have a significant stake in the fund themselves. Beware of sector funds with great records, too -- an energy-oriented fund may do well in one decade only to stagnate in another.

Choose carefully. If you'd like to jump-start your research, let us help you. We'd love to introduce you to some market-beating funds with great managers, low fees, and outstanding track records via our Motley Fool Champion Funds newsletter. Try it for free, and see which funds our analyst Shannon Zimmerman recommends -- and why. Together, his picks have gained an average of 25%, versus 17% for their benchmarks. Shannon will introduce you to many great investing minds who can invest your money for you via their funds. He even maintains three model portfolios, listing appropriate funds for conservative, moderate, and aggressive investors. Balanced funds, small-cap funds, foreign funds, bond funds, value funds ... you name it, and he's got it for you. See for yourself.

Or learn much more in these articles:

• 7,000 Funds, So Little Time
• You Can Beat the Market With Funds
• 3 Reasons You Need Funds

This article was originally published on July 28, 2006. It has been updated.

Selena Maranjian owns shares of Chico's FAS and Time Warner. Charles Schwab, Time Warner, and Best Buy are Stock Advisor picks. Eli Lilly and Diageo are Income Investor choices. The Motley Fool isFools writing for Fools.