If You Could Make Only One Investment ...

Music geeks tend to be big fans of the BBC's "Desert Island Discs" game: If you were stranded for the rest of your life, which eight albums would you want for company?

Investing geeks can't resist changing the question and raising the stakes: If you could make only one investment for the rest of your life, how would you proceed?

Better living through cheating
Me? I'd cheat. For choosing music, box sets -- like, say, The Jimi Hendrix Experience -- are the only way to go. And with investments, mutual funds should be your vehicle of choice. Why place all of your hard-earned moola on a single horse when you can spread your bets around and sleep peacefully with a top-notch fund?

On that front, Vanguard 500 Index (VFINX) and the SPDRs (SPY) exchange-traded fund are viable options -- low-cost S&P 500 trackers that rise and fall with a benchmark that counts Google (Nasdaq: GOOG), Time Warner (NYSE: TWX), and 3M (NYSE: MMM) among its top 50 holdings.

And these days, you can track other bogies easily. Value hounds may gravitate to iShares Russell 1000 Value (IWD), an ETF with top holdings of AT&T (NYSE: T) and Devon Energy Corporation (NYSE: DVN).

If you're looking for a more prolific vehicle, that's not a problem. The iShares Russell 1000 Growth (IWO) ETF is a simple way to dial up your exposure to racier plays such as Gilead Sciences (Nasdaq: GILD) and Transocean (NYSE: RIG), top holdings that have double-digit earnings-growth estimates for the next five years.

But investing in even rock-solid index funds means that you're destined to lose to the market: The most you can expect realistically is for your funds to lag their benchmarks every year by about the amount of their expense ratios.

The good news
Fortunately, you can do better than that. There are world-class actively managed funds with fortunes that aren't tied to an index, and managers who have shellacked the market over the course of many years. The challenge is to find them.

Amanda Kish, editor of Motley Fool Champion Funds, recommends that you focus on managerial tenure -- it goes a long way toward helping you zero in on a short list of worthies. A fund may have a stellar track record, but if the stock picker who earned those high marks isn't still in charge, that performance history doesn't tell you a thing about the fund's forward-looking prospects.

A fund's price tag is a critical piece of the puzzle, too. Expense ratios come right out of your returns, after all. All else being equal, the lower they are, the bigger your nest egg.

But all else isn't equal
There are plenty of other variables, but starting with those will take you a long way.

Of course, if you're pressed for time or ideas, Amanda and the team at Champion Funds, the Foolish investment newsletter dedicated to mutual funds, consider all of those data points and more. So far, about two-thirds of the team's picks have made money for shareholders since they were recommended, and that's amid less volatility than you'd experience with a portfolio of stocks -- much less a single pick. For a sneak peek at our lineup, you can take Champion Funds for a risk-free spin.

This article was adapted and updated from a Shannon Zimmerman article originally published Oct. 3, 2006. 

Claire Stephanic does not own any of the stocks mentioned. Google is a Rule Breakers recommendation. 3M is an Inside Value recommendation.  The Motley Fool owns shares of SPDRs and has a disclosure policy.