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Stocks & Bonds

Best Stocks and Mutual Funds

Our picks for the best investments your money can buy.

Our favorites include something for every investor, from the best domestic and international funds to the best green stocks and online broker. Plus, discover a great fund with a low minimum investment and the best stock to buy and hold for the long term.

We've laid out our picks in text format below, or you can check them out in our slide show.

BEST DOMESTIC STOCK FUND OPEN TO NEW INVESTORS
FAIRHOLM

It's hard to go wrong with this concentrated fund (it held 24 stocks at last report). The value-investing discipline of managers Bruce Berkowitz, Larry Pitkowsky and Keith Trauner keeps Fairholme (symbol FAIRX) out of trouble in bear markets and lets investors participate in the upside of bull markets.

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Net result: The fund has returned an annualized 18% since its launch in December 1999, trouncing Standard & Poor's 500-stock index by an average of 16 percentage points a year (all long-term performance data are to October 1).


BEST STOCK TO PUT AWAY AND FORGET
MEDTRONIC

The Minneapolis-based maker of medical devices (MDT) offers investors a solid combination of growth and income. Its broad portfolio of products, such as heart pacemakers and artificial spinal disks, will continue to meet the demands of an aging population.

Meanwhile, Medtronic's business generates a flood of cash, which it uses for shareholder-friendly dividend payments and share repurchases. The payout has risen each year since 1978.

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BEST NATURAL-RESOURCES FUND
T. ROWE PRICE NEW ERA

Longtime manager Charles Ober takes an eclectic approach to picking stocks. Rather than invest solely in commodity producers, such as oil companies, he diversifies the fund with businesses that supply and service those producers. Such bets mean that New Era rarely dwells with the dogs during a downturn in this volatile sector.

The 0.66% expense ratio, well below average for this category, is another plus. The $5.8-billion fund (PRNEX) gained an annualized 14% over the past decade.


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BEST FOREIGN STOCK FUND
DODGE & COX INTERNATIONAL

The fund epitomizes the all-around excellence we've come to expect from this San Francisco-based money manager: meticulous research in identifying undervalued stocks, modest management fees, low portfolio turnover and strong securities selection.

International (DODFX) has returned an annualized 30% over the past five years, an average of six percentage points better than its overseas benchmark.


BEST INDEX FUND
VANGUARD MID CAPITALIZATION INDEX

A good index fund is low-cost, well diversified and covers an area of the market that should be in your portfolio. A great index fund does all of that and beats most of the actively managed funds that cover the same turf.

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Since starting in 1998, this fund (VIMSX) has gained 12% annualized, beating the typical mid-cap fund by an average of two percentage points per year. The annual expense ratio is just 0.22%. An exchange-traded version, Vanguard Mid Cap ETF (VO), charges just 0.13%.


BEST LOW-MINIMUM FUND
HOMESTEAD VALUE

Managers Stuart Teach, Peter Morris and Mark Ashton excel at sniffing out beaten-down stocks of companies with solid long-term prospects. They've churned out an 8% annualized return over the past ten years to October 1, beating the S&P 500 by two percentage points per year on average. The $800 million fund (HOVLX) has historically protected shareholders during market declines; it lost only 7% during the 2000-02 bear market, compared with the S&P index's 47% decline. You can open an account with just $500, an unusually low minimum.


BEST GREEN STOCK (TRADITIONAL)
SUNPOWER

High energy prices and growing concerns about greenhouse gases suggest that clean, renewable sources of energy, such as solar power, will stay in vogue. This San Jose, Cal., company (SPWR) makes the solar industry's most energy-efficient panels.

At $74, the stock is pricey, selling for 38 times 2008 earnings forecasts of $1.96 per share. But that price could turn out to be a bargain if analysts are right in their predictions of 40% annual profit growth over the next few years. (See more green stock picks.)


BEST GREEN STOCK (NONTRADITIONAL)
GENERAL ELECTRIC

Think of GE as an alternative-energy venture-capital fund. It invested nearly $1 billion in clean-energy research and development last year. The company is a major producer of wind- and nuclear-powered turbines, it is developing technologies to make coal-burning power plants cleaner, and it is seeking to improve the energy efficiency of a host of products, from dishwashers to locomotives.

GE sees sales from its clean-energy businesses -- $12 billion last year (out of $163 billion) -- rising to $20 billion by 2010. (See more green stock picks.)


BEST ONLINE BROKER FOR FUND INVESTORS
MURIEL SIEBERT

Siebert carries a selection of nearly 3,000 no-load funds, and more than 1,800 of them are available without a transaction fee. The broker's easy-to-navigate Web site (www.msiebert.com) offers countless ways of comparing funds. The firm also wins points for automatically sweeping customers' cash into a money-market fund and keeping nuisance fees at bay.

See our complete ranking of online brokers for fund investors.


BEST FUNKY EXCHANGE-TRADED FUND
RYDEX S&P EQUAL WEIGHT

The traditional S&P 500 multiplies stock price by the number of outstanding shares to weight its members, so huge companies have greater influence on performance than small ones. The Rydex fund (RSP) gives every company equal weighting. That tilts the mix toward smaller companies, which perform better over time. Over the past ten years, an equal-weighted version of the S&P 500 returned 10% annualized, compared with 6% for the traditional weighted index. The Rydex fund charges annual fees of just 0.40%.


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