Sometimes it's good to prowl around the data and see what turns up. While there is no guarantee that past performance in a mutual fund will be repeated in the future, a long and positive history of superior performance is a pretty good indication that someone knows what they are doing. It's also comforting during periods of market misery.

So here's what I did in a recent exploration of the Morningstar Principia mutual fund database. First, I limited the search to funds with at least 20 years of history--- only 1,145 funds. Limiting the search to domestic equity funds cut the number to 562.

Requiring that the fund did better than the Vanguard 500 Index fund--- my usual benchmark---over the last 5, 10, and 15 years reduced the number to only 173. In other words, only 30 percent of the funds consistently did better than the Couch Potato approach.

Then I made sure it was still possible to invest in the fund, that the minimum investment was $10,000 or less, and that it was a true no load fund. That eliminated some interesting load funds (more about them later) but it still left a field of 94 funds that anyone could buy. At that point my search became more idiosyncratic as I examined the funds themselves.

Here is what I found:

*** The Top Performing Funds Were Sector Funds. Over the last 15 years Fidelity Select Brokerage topped the list with an annualized return of 19.10 percent. The 20 year return was still a stunning 12.99 percent, nearly 2 percentage points ahead of the S&P 500. A $10,000 investment in a tax deferred account would have grown to $115,000 over the 20 year period.

Significantly, seven of the ten highest return funds were Fidelity Select sector funds: Brokerage, Home Finance, Financial Services, Banking, Insurance, Defense and Aerospace, and Energy Services. Small wonder the financial sector now accounts for 20 percent of market value in the S&P 500.

As you would expect, all these funds have more price risk than broader portfolios.

*** Several Balanced Funds Stayed in the Ring. Bonds aren't supposed to keep up with stocks long term so it is unusual that the list included two balanced funds. T. Rowe Price Capital Appreciation fund (ticker: PRWCX) provided 15 and 20 year annualized returns of 12.29 and 12.65 percent, respectively. And it did it at a risk level (as measured by price volatility) that was nearly half the risk of the S&P 500 Index.

Mairs and Power Balanced (ticker: MAPOX) followed with 15 and 20 year returns of 11.15 and 10.64 percent, respectively. Vanguard Wellington (ticker: VWELX) clocked in at 11.06 and 10.71 percent for 15 and 20 years, respectively. Value Line Income and Growth Fund (ticker: VALIX) returned 10.75 and 10.04 percent, annualized, over the 15 and 20 year periods.

What's important about these funds is that they provided superior returns with significantly less risk.

Two load funds would have been on the list but for their loads. But if you had an advisor who put you into one of these funds years ago, you were well served: American Funds Income Fund and Van Kampen Equity and Income fund.

*** More return, less risk. Asking for all the funds that produced superior returns with less risk reduced the list to only 37 funds, including all the balanced funds mentioned above. Weitz Value (ticker: WVALX) and Weitz Partners Value (ticker: WPVLX), both large cap value funds, made the cut. So did T. Rowe Price Equity Income (ticker: PRFDX), Fidelity Equity Income (ticker: FEQIX), Vanguard Windsor II (ticker: VWNFX), and Selected American Shares (ticker: SLASX).

Again, a healthy number of load funds would have qualified: American Funds Investment Company of America Fund, American Funds Washington, American Funds Fundamental, American Funds AMCAP, Putnam Equity Income, ING Corporate Leaders, Pioneer, Pennsylvania Mutual Investor, and Davis New York Venture.

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Personal finance writer Scott Burns is syndicated by Universal Press. His twice weekly column appears in newspapers from Boston to Seattle. He is the Chief Investment Strategist for AssetBuilder, Inc. Readers can register at www.scottburns.com. Questions/comments can be posted directly. They can also be sent, without registration, to scott@scottburns.com. Questions of general interest will be answered in future columns and on this blog.

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