Looking for the best mutual funds? There's a new fund-rating system in town that lets you look up a fund and see its grade, from A to F, along with its standing according to four different models.

MUTUALdecision, which developed the system, touts the superiority of its results over competitors like Morningstar's star-based system by stressing that the four academic models it uses are predictive, rather than based solely on historical performance. It also uses 20 years of fund data as opposed to Morningstar's 10 years. 

Its models look at several different factors. One compares a fund's actual returns to what a buy-and-hold strategy would have achieved. Another compares a fund's holdings and returns to those of its benchmark. One model compares a fund's managers with top-performing managers, while a fourth uses statistical methods and back-testing to predict how well a fund might perform in the future. It sounds exciting.

For starters, I liked learning about how each of the models added a performance advantage. The first model produced top-rated funds that beat the market by 1.2% annually over 20 years, and that the second model's top-rankers outperformed their benchmarks by 1.5% annually. Yet of course, the proof will be in how those models perform in the future.

Useful enough
I looked up one of my favorite funds, the Fairholme Fund (FAIRX), and was surprised to find that it wasn't top-rated. Still, I found value in the offerings. I won't rush out to buy into the top funds, but they can give me some leads for further research. Here are four of the top 10 funds:


Maximum Sales Load

Expense Ratio

Recent Top Holdings Include

Heartland Select Value (HRSVX)




Yacktman (YACKX)



Pfizer, eBay (NASDAQ:EBAY)

Thornburg Value A (TVAFX)




Fidelity Select Consumer Staples (FDFAX)



CVS Caremark (NYSE:CVS), PepsiCo (NYSE:PEP)

Data: MUTUALdecision, Morningstar.

I'm a little surprised that a fund with a hefty 4.5% load made the top 10, but the list still seems worth investigating. Of course, when I want to research mutual funds further, Morningstar is still a good place to get additional information.

For more on investing with funds, read about:

Longtime Fool contributor Selena Maranjian owns shares of Fairholme, eBay and PepsiCo and typed this article on a Dell computer. eBay and Morningstar are Motley Fool Stock Advisor selections. Dell, eBay, and Pfizer are Motley Fool Inside Value selections. PepsiCo is a Motley Fool Income Investor recommendation. ABB is a Motley Fool Global Gains selection. Fairholme is a Motley Fool Champion Funds recommendation. The Fool owns shares of Morningstar. Try any of our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.