Investors have notoriously short attention spans. They focus too closely on recent market events, quickly forgetting the hard-learned lessons of years past. Considering only the past six or 12 months of performance is a surefire way to make costly investment mistakes. Don't believe me? Let's take a more critical look at some of the best-performing funds so far this year.

Topping the charts
To date, 2007 has been a fairly decent market for most equity funds. But if we examine year-to-date returns through the end of May, the following funds rise to the top:

Fund

YTD Return

Direxion Latin America Bull 2X Fund (FUND:DXZLX)

49.9%

Direxion Commodity Bull 2X Fund (FUND:DXCLX)

48.2%

Market Vectors Steel ETF (AMEX:SLX)

43.7%

S&P Metals & Mining SPDR (AMEX:XME)

41.2%

Dreyfus Premier Greater China Fund (FUND:DPCAX)

40.3%

Source: Morningstar. Returns through 6/22/2007.

Impressed with these returns? Thinking about buying in? If so, imagine me slapping your hand with a ruler. Focusing on short-term performance is a definite no-no. Despite these impressive YTD returns, Fools shouldn't want to own any of these five funds.

Behind the numbers
Only one of these funds, the Dreyfus Premier China Fund, has even been around for longer than two and a half years. The other four are relatively new, lacking any kind of long-term track record to judge them by. This alone should make investors wary. Investors should always look for funds with track records spanning both positive and negative market environments. A paltry two and a half years of performance means that none of these four funds has any experience investing when the market sours.

Fund investors should also seek long-tenured managers or management teams. Even though it's been around since 1998, the Dreyfus Premier China Fund fails to measure up on this count. Its two portfolio managers have been with the fund since 2003 and 2006 -- not long enough to have significant experience with the international bear market between 2000 and early 2003.

Most importantly, the majority of investors have no strategic need for these funds. The Direxion funds are leveraged funds offering 200% of the return of the Latin American or commodities markets. I can't think of many investors for whom this makes sense, unless you're simply betting on these narrow market segments to make a quick profit. That seems more like gambling than investing.

Similarly, how many investors have a strategic reason for wanting specific exposure to the steel and mining industries? If you want to invest in companies like U.S. Steel (NYSE:X), Rio Tinto (NYSE:RTP), and Reliance Steel & Aluminum (NYSE:RS) to hedge against existing holdings or business strategies, owning one of these ETFs might make sense. But most investors are simply more likely to buy after seeing this sector's red-hot returns in recent months.

There's also little good reason for an investor to own a China-specific fund. International exposure is important for almost every investor, but a diversified approach is best. Choose a fund that invests around the globe, and you'll get your exposure to China, along with other countries and regions. While a China-only fund may provide eye-popping returns for a few months, it's also likely to suffer sudden and dramatic drops.

Keep your eye on the long term
Remember that short-term returns are exactly that: short-term. The five funds that currently top the year's performance charts hold very volatile asset classes, and they're just as likely to end up at the bottom of the list in the next six months. While it may be tempting to try to catch some of the hot performance these funds and sectors have experienced in recent months, Fools know that's a losing battle. Focus on your portfolio's long-term goals, and try to block out all the short-term noise. Trends will come and go, but long-term strategic investing is forever.

Further fund-amental Foolishness:

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Fool contributor Amanda Kish lives in Rochester, N.Y., and does not own shares of any of the companies or funds mentioned herein. The Fool's disclosure policy never forgets.