Double Your Money With Funds

Finding solid, growing companies isn't rocket science. Many terrific companies are all around you, and every now and then, they'll trade at reasonably attractive prices.

Some stocks, as you probably know, can perform phenomenally well even in unexciting industries such as retail or beverages. Consider Chico's FAS, for example, which has grown at an average compound annual rate of more than 64% during the past decade -- enough to turn $5,000 into $718,500. Drink maker Hansen Natural gained an average of 78% each year over that same period, while Best Buy grew by 46% annually, on average. These are, admittedly, extreme examples, and relatively few people were aware of these firms a decade ago.

You don't have to find small, esoteric companies to do well, though. Apple (NASDAQ:AAPL), for example, has increased at an average annual rate of 35% over the past decade. But if you're not confident in your stock-picking abilities, you don't have to go beyond your comfort zone to find great investments.

Consider funds
You'll find more than 7,000 mutual funds out there, and yes, many of them stink.

But there are also plenty of top-notch funds with smart managers, reasonable fees, and solid track records. Don't think of opting for mutual funds as any kind of capitulation. I've recently been moving big chunks of my own nest egg into mutual funds, and it's not because I'm throwing in the towel on my hopes for high returns. It's more a matter of realizing there are people out there who can make my money grow faster than I can on my own.

In fact, they can double your money just as effectively as many top stocks. Consider the 10-year average annual return of these mutual funds:

See? Some funds out there do boast pretty strong long-term returns, and all it takes is an average annual return of 14.9% for five years to double your money.

So should you snap up shares of the above funds? No -- at least not just because they're in that table. For one thing, some are closed to new investors. You should also research any fund before investing. Check to see how steep its fees are. Read up on the managers to make sure they've been in place for at least a few years and that you like their investing philosophy and approach. Ideally, they should have a significant stake in the fund themselves. Beware of sector funds with great records, too -- an energy-oriented fund may do well in one decade only to stagnate in another.

Choose carefully
If you'd like to jump-start your research, let us help you. We'd love to introduce you to some market-beating funds with great managers, low fees, and outstanding track records via our Motley Fool Champion Funds newsletter. Try it for free (with no obligation and full access to all past issues) and see which funds our analyst Shannon Zimmerman recommends -- and why. Together, his picks have gained an average of 31%, vs. 18% for their benchmarks. Shannon will introduce you to many great investing minds who can invest your money for you via their funds. He even maintains three model portfolios, in which he lists appropriate funds for conservative, moderate, and aggressive investors. Balanced funds, small-cap funds, foreign funds, bond funds, value funds ... you name it, he's got it for you. See for yourself.

Or learn much more in these articles:

• This Year's Best Investments
• Great Investments for Busy People
• Steal These Stocks!

This article was originally published on July 28, 2006. It has been updated.

Selena Maranjian owns shares of Chico's FAS and Johnson & Johnson. Vodafone is an Inside Value recommendation. Johnson & Johnson is an Income Investor pick. AT&T is a former Stock Advisor selection, and Best Buy is a current pick. For more about Selena, view her bio and her profile. The Motley Fool is Fools writing for Fools.