Funds that invest chiefly in companies based in the U.S. are first divided into three groups according to the size of the companies whose shares they buy and sell. Small-cap funds place their bets among the approximately 6,000 remaining actively traded stocks. We've broken down the domestic categories further according to their managers' investment styles. Growth funds concentrate on companies with fast-growing sales and earnings. Value funds hone in on companies whose share prices don't appear to reflect the potential for appreciation.
International funds round out the mix.
The funds we selected invest principally in companies headquartered outside the U.S. and have portfolios weighted heavily toward the developed markets of Japan and Europe. For investors who prefer to put their money in companies that adhere to ethical workplace practices, and do not spoil the environment or engage in the manufacture or sale of weapons technology, we feature a separate listing of what are referred to as socially-conscious funds . Again, some investors may find such funds attractive, but they're best seen as supplemental to an overall investment plan in which you choose your own preferences between equity and fixed-income holdings. To qualify for a place in our listings, actively managed funds had to rank among the top one-third of their peers having a similar investment style since the beginning of 1998. Thus, while a majority of the large-cap funds on our list may have suffered declines last year, they were all performance pacesetters over the longer term.