Please check out our newly revamped and updated Our Favorite Funds section. In it you'll find a complete list of our single favorite fund in each of 24 fund categories, as well as our favorite exchange traded fund, low minimum, and no transaction fee options for each category.

Give it a look by clicking here, and if you have a minute let us know what you think.

Stacey Asks:

After Monday’s drop, Evergreen Precious Metals had fallen about 68% since its peak in March 2008. That's more than the S&P 500, Dow, Nasdaq, MSCI EAFE Index, junk bond market, emerging market bond market, classic car market, housing market, and subprime loan market. Okay, maybe not more than subprime, but you get the point.

What's most surprising, and probably the root of your question, is that the fund has fallen far further than gold itself, that shiny metal that comprises the core of the precious metals funds. If you compare this fund to the Gold ETF (see streetTRACKS Gold Trust ETF [GLD]), you won't be impressed with your fund's performance. But if you compare it to other gold funds, you might feel a bit better. Popular gold funds like Vanguard Precious Metals And Mining (VGPMX), Fidelity Select Gold (FSAGX), Oppenheimer Gold & Special Miners (OPGSX), Franklin Gold And Precious Metals (FKRCX), and USAA Mutual Funds Precious Metals (USAGX) are in equally rough (or worse) shape.

As it turns out, gold-related companies are no more magical than any other commodity-related companies you'd find in a natural resource fund. We've just witnessed one of the fastest drops in broad commodity prices in history. The fact that the nosedive followed the launch of dozens of commodity funds inspired by investor fascination with 'hard assets' should come as no surprise. ...read the rest of this article»

The last time investors could buy shares of the Sequoia Fund (SEWUX), Olivia Newton-John was at the top of the charts. The longest closed-to-new-investors period in mutual fund history ends May 1st:

The Sequoia Fund, after experiencing selling by investors, is reopening its doors May 1 to new investors for the first time since 1982.

The $3.5 billion value fund is celebrated for outperforming the broader market during much of its 38-year history. For years, it was run by legendary stock picker William Ruane, who followed the same approach as Benjamin Graham and Warren Buffett.

In recent years, however, Sequoia has a mixed performance record, lagging the Standard & Poor's 500-stock index in three of the past five calendar years.

Selling by investors caused assets to fall to a level lower than it was a decade ago, the funds' managers wrote in a report for the quarter ending March 31. If that were to continue at that rate, it could 'cause us to have to sell stocks that we didn't want to,' said co-manager Robert Goldfarb, 63 years old, in a telephone interview Wednesday."

Fund investors are bailing out of the fund in part because of its relatively ho-hum performance in recent years, but mostly because of demographics - you close a fund to new investors long enough eventually asset levels will go down.

We've never given the Sequoia Fund much thought for our private management clients or Powerfund Portfolios, mostly because we couldn't have bought shares if we had wanted to - but now that it is set to reopen we still wont be first in line to invest. The fund was too large to outperform and with a ginormous 25% stake in Berkshire Hathaway and a low turnover portfolio, investors could almost rebuild the fund stock by stock. That said, we give the fund kudos for being one of the few value funds to pass on banks and other financials even though they looked cheap relative to the market.

We're also wary because funds with low cost basis holdings are not good places for new investors if other investors are leaving. Newbies could see big piles of other peoples tax liabilities distributed to them at the end of the year (something the fund company notes in their last report). The reopening should partially alleviate this problem as inflows will counter outflows, but fund investors are pretty cool on domestic stock funds with so-so records in recent years so inflows could be limited. Investors who have tax deferred accounts (and who hence don't have to worry about potential tax liabilities) that want to lock in shares of the fund in case it closes again may want to do so with the fund's $2,500 IRA minimum ($5,000 regular accounts).

LINK

The Securities and Exchange Commission (SEC) just launched their new Mutual Fund Reader, an online tool that lets fund investors review data provided by fund companies to the SEC:

The Mutual Fund Reader enables fund investors to read, analyze and compare mutual fund information concerning cost, risk, investment objectives and strategies, as well as historical performance.

The SEC adopted a new rule in June 2007 enabling mutual funds to submit risk/return summary information voluntarily from their prospectuses using XBRL, a computer software language that labels company financial and business data so investors and analysts can more easily find what they’re looking for and use the information for comparisons.

Twenty mutual funds so far are using the XBRL system, and additional filers are expected to participate in the coming months, the SEC wrote in a press release."

With such a small sampling of mutual funds contributing to the system at launch, there's not a heck of a lot data to compare at the moment - but down the road this could be a useful tool.

As banks are now learning the hard way, relying on past performance to predict future returns can be a recipe for disaster. If mortgage default rates remained at the levels of the past, all the no-money-down lending made in recent years wouldn't be causing a financial calamity today. The same is true for investing in mutual funds. What has worked in the past often doesn't work in the present. As a fund investor, you have to be very careful you are not loading up on yesterday's good ideas. Unfortunately, fund rating and ranking systems tend to have the opposite affect: they direct you into yesterday's winners.

A current article on TheStreet.com titled "Five Perpetually Winning Mutual Funds" shines a spotlight on five funds that TheStreet's rating system has given highest marks to for the last two years.

The "A+" funds in question are:

AIM European Growth A (AEDAX)
JPMorgan International Value A (JFEAX)
Franklin Mutual European A (TEMIX)
DFA International Value IV (DFVFX)
Dodge & Cox International Stock (DODFX)

Everybody loves a winner. Unfortunately these five fund will all very likely underperform the S&P 500 over the next few years.

The main problem is that this list of winners is really just the best performing funds in a fund category that has happened to beat most other funds over the last eight years - foreign funds that are more value than growth. If TheStreet had created this list in 2000, they would have wound up with five large cap U.S. stock funds with a heavy growth bend. Janus, PBHG, and Firsthand funds would probably have dominated the list.

Rating funds based on how they do against all funds in general is very dangerous. Morningstar learned this the hard way when they dolled out five star ratings to just about every U.S. large cap growth and tech fund manager with a pulse in 2000 while slamming foreign and small cap value funds. Morningstar eventually started doing things a little more like MAXfunds has since 1999 - comparing each mutual fund to similar funds (though they do not consider fees, fund size, category valuations among other things we consider). Clearly TheStreet.com is still using this old fashioned fund rating methodology.

If you think the next few years will be more of the same - a sharply falling U.S. dollar and European stocks clobbering U.S. stocks, these funds are for you. You certainly won't be alone in your decision - this is how most fund investors are allocating their money to funds these days. Our guess is it is many of the people who overloaded on tech and growth funds in 2000.

LINK

The Wall Street Journal’s personal finance guru Jonathan Clements is keen on some of the new fangled ETFs mutual fund companies are churning out by the fistful:

The article notes the fabulous diversification offered by new ETFs investing in foreign real estate, international small caps, commodities, and foreign bonds:

Foreign Real Estate
iShares S&P World ex-U.S. Property (WPS)
SPDR DJ Wilshire International Real Estate (RWX)
WisdomTree International Real Estate (DRW)

International Small Caps
iShares MSCI EAFE Small Cap (SCZ)
SPDR S&P International Small Cap (GWX)
WisdomTree International SmallCap Dividend (DLS)

Commodities
Shares S&P GSCI Commodity (GSG)
PowerShares DB Commodity (DBC)
iPath Dow Jones-AIG Commodity (DJP)
iPath S&P GSCI Total Return (GSP)

International Bonds
SPDR Lehman International Treasury Bond (BWX)

Adding these funds will add diversity: your boring U.S. stock, bond, and money market funds will go up in coming years while the new ETFs will go down. That’s diversity we can do without. ...read the rest of this article»

Fortune Magazine lists 'six standout mutual funds', inexpensive no-loaders run by managers that have posted category-beating returns over the last decade:

Here's the complete list:

• CGM Focus (CGMFX)
• Manning & Napier World Opportunities (EXWAX)
• Oakmark Select (OAKLX)
• FBR Focus (FBRVX)
• Bridgeway Ultra-Small Company Market (BRSIX)
• Artisan International (ARTIX)

While owning lower fee funds with good long term track records is better than some fund investing strategies, you’ll likely underperform the market in the next 1-3 years if you buy the funds on this list. ...read the rest of this article»

Many borrowers are now finding that getting out of their mortgage can be financially painful, according an article in the New York Times:

While we feel sorry for the borrowers who were not aware of penalties, millions of mutual fund investors have faced a similar unexpected punishment when trying to move out of one fund and into another.

Back end load funds were invented by the mutual fund industrial complex as a way create the illusion of selling a no load fund (a fund where the investor pays no sales commissions to buy) while still collecting the load. The sales fee, or load, in only charged when the investors sells. To this day, most back end load class fund investors have no idea there is a large commission involved - as high as 5.75% - when they sell shares... ...read the rest of this article»

Forbes just published its list of 'Honor Roll' funds for 2007, and while there's not a real stinker in the bunch – this is no buy list. Here are the funds that made the cut, along with our MAXrating for each one:

Bruce Fund (BRUFX) MAXrating: 84
Delafield Fund (DEFIX) MAXrating: 63
Keeley Small Cap Value (KSCVX) MAXrating: 68
Mairs & Power Growth Fund (MPGFX) MAXrating: 80
Muhlenkamp Fund (MUHLX) MAXrating: 61
Osterweis Fund (OSTFX) MAXrating: 77
Perritt MicroCap Opportunities (PRCGX) MAXrating: 93
Stratton Small-Cap Value (STSCX) MAXrating: 70
Third Avenue Value (TAVFX) MAXrating: 85
Value Line Emerging Opportunities (VLEOX) MAXrating: 93

According to Forbes, to get on the Honor Roll "contenders must pass a number of stringent tests. The managers must have been on the job for at least six years; a newbie can't ride on the boffo showing of his predecessor. We also want portfolio diversification. Thus sector funds don't get in. And a fund must be open to new investors." Forbes also looks at how well funds have done through past up and down markets.

But like all top fund lists, this one has its share of problems... ...read the rest of this article»

In another sign that lending standards are tightening fast, starting today E*TRADE Financial Corporation (ETFC) no longer offers home equity lines of credit (HELOC) at rates below Prime regardless of a borrower’s credit rating or equity in the home. This comes just a few days after some less liquid, investment grade mortgage related securities were repriced downward, hurting some safe bond funds... ...read the rest of this article»