But large-cap growth funds do have negatives. Many of the stocks they own are trading at pretty lofty levels. These funds may also falter if investors start to feel more confident in the nation's economic prospects, warns David Fowler of Lincoln Capital Management in Chicago. Fowler helps co-manage Vanguard's U.S. Growth portfolio, another standout fund in recent years. Take prudent risks.
Many investors look to pump up their returns with funds that focus on one sector or another.
Of course, less diversification can mean higher risk. Technology investors found that out last quarter as tech sector funds slid 11 percent, according to Lipper Analytical Services. But health-related sector funds have managed to muddle through whether the market has been healthy or ill. Thanks to their investments in drug stocks, these funds are smart bets during periods of economic worry. If you're looking for a good return and some peace of mind, all these funds are solid choices.