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The 10 Hottest-Selling Mutual Funds Are Also Keepers

Surprise, surprise.

Mentioned: , , , , , , , , ,

Well done, average fund investor.

A look at the top selling funds for 2006 (based on preliminary data) shows that fund investors en masse were making better selections than usual. As long as mutual funds have been around, the biggest mistake fund investors have made is chasing performance at the expense of fundamental factors such as management, strategy, and expenses. The basic flaw in doing that is that you're buying yesterday's winners rather than focusing on the things that actually help you pick tomorrow's winners. Check out the record of hot-selling Internet and tech funds from 1999 to see where that path leads.

For 2006, though, I was pleased to see that the trendiest stuff didn't make the list. No China funds, no Russia funds, not even a real-estate fund. Rather, the top-selling funds were broadly diversified, well-managed, and low in cost. True, there was an emphasis on funds with strong recent returns and many of the funds suffer from asset bloat, but those are minor concerns compared with buying supertrendy supercostly niche funds like the top-performing China funds.

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Russel Kinnel has a position in the following securities mentioned above: SLADX, PTTRX, DODFX. Find out about Morningstar’s editorial policies.