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 54% during the past decade, enough to turn $5,000 into nearly $400,000. Drink maker Hansen Natural gained an average of 72% each year in that same period, and Best Buy grew by 44% annually, on average. These are, admittedly, extreme examples, and relatively few people were aware of these firms a decade ago.

You don't have to find small, esoteric companies to do well, though. Apple, for example, has increased in value 13-fold over the past decade, at an average annual rate of 30%, while Procter & Gamble returned an average of 11% in the same period, and General Dynamics 18%.

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 Procter & Gamble and General Dynamics 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 to make sure they've been in place for at least a few years and that you like their investing philosophy and approach. 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 27%, versus 19% 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, in which he lists 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. Best Buy is a Stock Advisor recommendation. Diageo is an Income Investor pick. Legg Mason is an Inside Value pick. The Motley Fool isFools writing for Fools.