The Market's 10 Best Funds

We're trotting out the gloomy numbers again:

  • More than 7,000 mutual funds are vying for your investment bucks.
  • Fewer than 25% of them actually outperform the S&P 500 over the long haul.

And?
Even stock investors searching for the 10 best stocks should pay attention, because more than 90 million Americans own mutual funds. (Just think of what's stuffed in your 401(k).) So the news that most funds lag lazy indices should be taken sitting down.

Drum roll, please ...
There are, however, great funds out there ready to make you money. The 10 best-performing mutual funds of the past 10 years:

Fund

Ticker

10-Year Return*

Recent Holdings

Matthews Korea

MAKOX

27.16%

Samsung Electronics, Hana Financial

CGM Focus

CGMFX

25.92%

Mosaic, U.S. Steel (NYSE:X), Hess (NYSE:HES)

Vanguard Precious Metals & Mining**

VGPMX

23.73%

Eramet, Lonmin, FMC (NYSE:FMC)

Jennison Natural Resources

PGNAX

22.94%

Freeport McMoRan, Suncor Energy, Talisman Energy (NYSE:TLM)

U.S. Global Accolade Eastern Europe

EUROX

22.71%

Vimpel Communications, Mobile Telesystems

USAA Precious Metals & Minerals

USAGX

22.43%

Goldcorp, Eldorado Gold (NYSE:EGO)

Kinetics Internet

WWWFX

21.95%

Leucadia National, NYSE Euronext, Broadridge Financial (NYSE:BR)

Oppenheimer Developing Markets

ODMAX

21.07%

Petrobras, Infosys Technologies

CGM Realty

CGMRX

20.63%

Mosaic, ProLogis (NYSE:PLD)

Wasatch Micro Cap**

WMICX

20.47%

O2 Micro International, China Hongxing Sports

*Annualized. Data from WSJ.com through Dec. 20, 2007. **Closed to new investors.

OK, so international markets, precious metals, and small caps have done well over the past decade ... that doesn't help us going forward. What's worse, two of the 10 best funds are now closed to new investors.

But that's OK. You don't want to chase past performance anyway.

The foundation of greatness
Let's take a step back and see what we can learn from the 10 top-performing funds.

Metric

Equity Fund Average

Top 10 Funds by Performance

Manager Tenure

3.8 years

8.5 years

Expense Ratio

1.51%*

1.36%

*Data from the Investment Company Institute.

The best funds of the past 10 years had, on average, longer-tenured managers and charged less to manage your money. Those two facts are so important that they bear repeating: The best mutual funds of the past 10 years had long-tenured managers who charged less to earn you more money.

Even better, eight of the 10 best mutual funds of the past decade did not charge loads -- the onerous upfront sales fees that some funds try to get away with charging.

For all 90 million of you ...
So, if you're looking to invest in one of the best mutual funds of the next 10 years, you know where to start: with long-tenured managers who don't charge you an arm and a leg to invest.

Not coincidentally, that's the drum our team at Motley Fool Champion Funds has been beating for years, and with great success. Those are some of the very first characteristics we screen for in prospective funds, and Champion Funds has found success with that formula: Recommended funds are easily beating their benchmarks. (In fact, the two CGM funds are formal Champion Funds recommendations.)

If you'd like to see our entire list of recommended funds, click here to join the service free for 30 days. One of the next decade's best performers just might be lurking therein.

This article was originally published Aug. 11, 2006. It has been updated.

Neither Tim Hanson nor Brian Richards owns shares of any company mentioned. NYSE Euronext is a Rule Breakers recommendation. Petrobras is an Income Investor pick. The Fool's disclosure policy never underperforms.


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