The Market's 10 Best Funds ... Revealed

A record $883 billion was added to mutual funds during 2007, and you were likely one of the contributors. If that's the case, and you added a single dime to funds in your 401(k), IRA, or taxable accounts, you must keep reading.

But first, some history ...
Two summers ago, we decided to take stock of the 10 best-performing U.S. mutual funds. With thousands of funds vying for your dollars, and considering the Great American Retirement Shift, in which self-directed, fund-holding 401(k)s are becoming the best hope workers have for retirement, we hoped that looking at the cream of the crop would be instructive.

Was it ever!

Two very powerful conclusions emerged. The best mutual funds of the past decade:

  • Charged lower-than-average expenses.
  • Had longer-tenured managers.

Today's experiment
Those results make perfect intuitive sense. (Of course the smartest investors, charging the lowest fees, will net you the biggest returns!) But with the market environment today drastically different from what it was two years ago, we figured now was a good time to rerun the numbers and confirm (or deny) our conclusion.

Without further ado [insert drum roll here], the 10 best-performing mutual funds of the past 10 years are:

Fund

Ticker

10-Year Return*

Recent Holdings

ING Russia

LETRX

30.67%

Lukoil, Gazprom

Vanguard Precious Metals & Mining**

VGPMX

26.48%

Eramet, CONSOL Energy (NYSE: CNX  )

CGM Focus

CGMFX

26.34%

Weatherford (NYSE: WFT  ) , Schlumberger (NYSE: SLB  ) , Peabody Energy

Jennison Natural Resources

PGNAX

25.73%

Southwestern Energy, Occidental Petroleum (NYSE: OXY  )

BlackRock Global Resources

SSGRX

25.90%

Massey Energy (NYSE: MEE  ) , Arch Coal

Matthews Korea

MAKOX

25.73%

Samsung, NHN, Shinhan Financial

USAA Precious Metals & Minerals

USAGX

24.88%

Goldcorp (NYSE: GG  ) , Agnico-Eagle Mines

Turner Emerging Growth**

TMCGX

24.18%

Bucyrus International, Deckers Outdoor

U.S.Global Investors Global Resources

PSPFX

23.50%

Occidental Petroleum, Transocean (NYSE: RIG  )

U.S.Global Accolade Eastern Europe

EUROX

22.81%

Gazprom, Lukoil

*Annualized. Data from Morningstar as of July 28, 2008.
**Closed to new investors.

This table does tell a different story than the one two years ago. Two years ago, small-cap funds were the outperformers. Today, thanks to enormous and growing demand for commodities, resources funds look like the place to have been.

But while the investment niche changed on us, the underlying traits of the top fund managers and their fee structures remained remarkably the same.

The foundation of greatness
Here's what we found when we compared the top funds with their peers:

Metric

Equity Fund Average

Top 10 Funds by Performance

Manager Tenure

3.9 years*

10.6 years

Expense Ratio

1.46%**

1.27%

*Domestic U.S. funds, according to Morningstar.
**Simple average stock fund expense ratio. Data from the Investment Company Institute.

The best funds of the past 10 years still 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, seven of the 10 best mutual funds of the past decade did not charge loads -- the onerous up-front 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. Low fees and veteran managers 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 beating the market by double digits.

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 first published July 28, 2008. It has been updated.

Neither Tim Hanson nor Brian Richards owns shares of any company mentioned. CGM Focus is a Motley Fool Champion Funds recommendation. The Fool's disclosure policy never underperforms.


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