As the year winds to a close, Mr. Market has placed some choice items in the bargain bin. Altria (NYSE:MO), Bank of America (NYSE:BAC), and ConocoPhillips (NYSE:COP), for example, all trade with price-to-earnings (P/E) ratios that fall below the broader market's despite annualized returns that, for the 10 years that ended with November, surpass those of the S&P 500. That's also true of IBM (NYSE:IBM), Texas Instruments (NYSE:TXN), Caterpillar (NYSE:CAT), and Tyco International (NYSE:TYC), a top-shelf list of investment prospects.

Quite the deals, no?

Could be
That said, as I've suggested in the past, savvy investors know that sometimes stocks that appear to be values are really value traps. How to spot the difference is the million-dollar question, and one smart way of answering it is to sidestep the question entirely.

Separating keepers from duds is a homework-intensive task and investing in world-class mutual funds provides a compelling alternative.

After all, sometimes high-quality stocks trade on the cheap for good reason. Even companies that have delivered the goods for shareholders over the course of many years can suffer extended dry spells. The upshot? For my money, mutual funds are the ideal investment vehicle for folks who want to both grow their wealth and minimize the risk of losing their principal.

Investing with a safety net
Funds, in other words, provide a no-muss, no-fuss way of dialing up your exposure to the stock market while dialing down the greater measure of volatility that necessarily comes with investing in just a handful of individual stocks.

That's a smart way to proceed if (like most of us) you've got better things to do than tend to your portfolio, yet are also well aware that the stock market is the place for your long-term money. Beyond that, because well-chosen funds can help minimize your downside risk, you'll have more skin in the game when the market shakes off its doldrums and resumes its upward trajectory.

For details on that front, just check this chart of the market year that was, and remember: The better job you do when it comes to principal preservation, the more miraculous the miracle of compound interest can be.

The Foolish bottom line
Convenient though they are, it's absolutely critical to put a fund through an obstacle course of paces before taking the plunge. Most, after all, are duds -- overpriced underachievers that fail to keep pace with the S&P over the long haul.

There are important exceptions to that rule, however, and the Fool's Champion Funds newsletter service exists to uncover them for you. We've been cherry-picking the cream of the industry's crop since March 2004, and taken together, our list of recommendations has beaten the S&P by nearly 10 percentage points. And while funds aren't risk free, that outperformance has come amid comparatively muted levels of volatility.

If you'd like to take a risk-free look at our list of recommendations -- as well as every column inch of investment advice we've offered investors since first opening for business -- click here for a completely free 30-day guest pass. There's no obligation to stick around if you find it's not for you. But if you're looking for Grade-A investment vehicles that can help smooth your path to retirement bliss, I suspect you'll find Champion Funds makes a handy roadmap.

Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service. At the time of publication, he didn't own any of the securities mentioned above. Tyco is a Motley Fool Inside Value recommendation. Bank of America is an Income Investor selection. The Fool has a strict disclosure policy.