We're going to trot 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.

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 indexes should be taken sitting down.

Drum roll, please ...
There are, however, great funds out there ready to make you money. Without further ado, the 10 best-performing mutual funds of the past 10 years:


10-Year Annualized Return*

Recent Top Holding

Wasatch Micro Cap (WMICX)


Big 5 Sporting Goods

Bridgeway Ultra-Small Company (BRUSX)





W.W. Grainger (NYSE:GWW)

Kinetics Internet (WWWFX)


Leucadia National (NYSE:LUK)

CGM Realty (CGMRX)


SL Green

Bruce (BRUFX)


Arena Resources

Bridgeway Aggressive Investors 1 (BRAGX)


BMC Software (NYSE:BMC)

Munder Micro-Cap Equity (MMEAX)


Southwestern Energy (NYSE:SWN)

Fidelity Select Brokerage (FSLBX)


Morgan Stanley (NYSE:MS)

FBR Small Cap (FBRVX)


Penn National Gaming (NASDAQ:PENN)

*Ended December 31, 2006. Data from Morningstar.

OK, so small caps have done well over the past 10 years ... which doesn't help us going forward. What's worse, four 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 100 top-performing funds.

Domestic Stock Fund Average

Top 100 Funds by Performance

Manager Tenure

3.9 years

7.8 years

Expense Ratio



10-Year Return vs. S&P 500



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, 71 of the 100 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 put your investment dollars 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 Fool fund wizard Shannon Zimmerman has been beating for years, and to great success. According to Shannon, those are the very first characteristics he screens for in prospective funds, and his performance as advisor of Motley Fool Champion Funds shows why: Shannon's funds are up 30% on average, while their relevant benchmarks are up just 18%.

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

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

Neither Tim Hanson nor Brian Richards owns shares of any company or fund mentioned in this article. The Fool's disclosure policy never underperforms.