Foolish investors know that diversification is the key to investing success. Take a pinch of large-cap growth, add a dash of small-cap value, a heap of international, and top it off with just a touch of fixed income. Voila! A winning portfolio.

Of course, when cooking up those holdings, you'll want to make sure you include all the relevant ingredients; miss something, and your portfolio will likely taste funny. One key ingredient has become increasingly important in recent years: emerging markets.

As with all mutual funds, there are plenty to choose from, but far fewer truly good ones. We'll examine some of the best emerging-market mutual funds around. To find them, we sought funds with a lengthy, consistent investment history, long-tenured management, solid performance, and low expenses. We also restricted the search to funds open to new investment. Here's what we found.

DFA Emerging Markets Value (DFEVX)
This is one of the best-performing emerging-market funds around, run by Dimensional Fund Advisors of Santa Monica, Calif. Portfolio manager Karen Umland has been heading up the fund's investment activities since 1998. Umland looks for emerging-market stocks trading at bargain prices. One of the main criteria used to determine relative value is a high book-to-market-value ratio. In assessing value, management considers other factors such as price-to-earnings and price-to-cash flow, as well as economic conditions and developments in the issuer's industry. POSCO (NYSE:PKX) and United Microelectronics (NYSE:UMC) are among the fund's biggest current positions.

The DFA Emerging Markets Value Fund tends to be slightly more concentrated than its peers, with almost 60% of its assets in just two sectors: 37% in industrial materials, and 21% in financial services. That tight focus is nothing new for the DFA fund, though, and history shows that it's paid off. The fund also sports a modest 9% annualized turnover and an amazingly low 0.63% expense ratio, far below the cost of the average fund in this market sector.

But DFA Emerging Markets Value's stellar performance record is undoubtedly its biggest selling point. The fund has posted an annualized five-year trailing return through June 2007 of more than 39%, earning more than 62% in just the last 12 months. The fund has consistently beaten the MSCI Emerging Markets Index, landing in the top quartile of its peer group for six out of the last nine years. With impressive absolute and relative returns throughout its entire existence, the DFA Emerging Markets Value Fund truly stands out as one of the top performers in the emerging-market category.

Bernstein Emerging Markets (SNEMX)
This fund is run by two separate groups at Bernstein, a growth team and a value team. This split is relatively new; until 2005, the fund was run entirely by the value group. However, this change doesn't diminish its overall appeal.

In general, the Bernstein Emerging Markets Fund typically equally weights the value and growth sleeves of the portfolio, resulting in more blended holdings. The fund focuses on mid-to-large emerging-market stocks, and currently holds its largest country weightings in South Korea (16% of assets), Brazil (15%), and Taiwan (12%). Its pricey 1.58% expense ratio is one of this fund's few shortfalls.

Long-term performance here has been solid, although the Bernstein fund lagged the index in 2005 and 2006. Investors shouldn't worry too much about those years, especially since the fund is performing nicely so far in 2007. It's returned almost 36% annually over the five-year period that ended in June, compared to about 27% for the MSCI Emerging Markets benchmark. Going forward, this fund's broadened strategy should help it perform nicely in all market environments, making it a solid choice for most investors' portfolios.

In Part 2 of this series, we'll examine more emerging-market fund winners.

We've mapped out further 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. POSCO is an Income Investor recommendation. The Fool's disclosure policy looks exactly like its passport photo.