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 with the Great American Retirement Shift, where 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 conclusions.

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

Fund

Ticker

10-Year Return*

Recent Holdings

ICON Energy

ICENX

20.5%

ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  )

BlackRock Global Resources

SSGRX

18.4%

PetroHawk (NYSE: HK  ) , Arch Coal (NYSE: ACI  )

CGM Focus

CGMFX

17.7%

Wells Fargo (NYSE: WFC  ) , Abbott Laboratories (NYSE: ABT  )

Jennison Natural Resources

PGNAX

16.6%

Southwestern Energy, Cameron International (NYSE: CAM  )

CGM Realty

CGMRX

15.8%

Digital Realty, Ventas

Turner Emerging Growth**

TMCGX

15.8%

Bucyrus International, Deckers Outdoor

AIM Energy**

FSTEX

15.2%

Occidental Petroleum, BP (NYSE: BP  )

Vanguard Energy

VGENX

14.8%

ExxonMobil, Chevron

RS Global Natural Resources

RSNRX

14.1%

Martin Marietta, Eastman Chemical

BlackRock Natural Resources

MDGRX

13.2%

EOG Resources, Devon Energy

*Annualized. Data from Morningstar as of Jan. 6, 2009; includes only domestic stock funds.
**Closed to new investors.

This table does tell a different story than the one we assembled two years ago. Back then, small-cap funds were the outperformers. When we looked more recently, energy and resources funds were the place to be, thanks to enormous and growing demand for commodities.

While these funds have taken it on the chin of late, their 10-year results are still instructive. 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

Domestic Stock Fund Average

Domestic Top 10 Performers

Manager Tenure

5.0 years

10.6 years

Expense Ratio

1.39%

1.25%

Data from Morningstar.

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, six 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 ...
If you're looking to take advantage of current prices by investing 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. Low fees and veteran managers are some of the very first characteristics we screen for in prospective funds.

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 and CGM Realty are Motley Fool Champion Funds recommendations. The Fool's disclosure policy never underperforms.


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