Money 70: Best mutual funds and ETFs

(Money Magazine) -- For the Money 70, our recommended list of mutual and exchange-traded funds, 2009 was a year of vindication. After the vast majority of the funds on our list suffered steep losses in 2008’s credit crisis, almost all rebounded strongly last year -- with many posting double-digit gains. But short-term returns aren’t the point. It’s far more important for you to focus on long-term results.

This list was never intended to be a collection of hot funds. Instead, the point of the Money 70 is to give you a menu of high-quality funds and ETFs that you can use to construct a well-diversified portfolio, which in turn will help you achieve your long-term financial goals.

And over lengthy periods of time, Money 70 funds have proved worthwhile -- provided you stuck with them in good times and bad. Take the case of Royce Pennsylvania Mutual. In a decade where gains were hard to come by in the U.S. stock market, this small-cap fund earned 9.5% a year vs. 3.9% for small stocks in general. Yet by moving money into and out of the fund at the worst possible times, Pennsylvania Mutual investors earned just 3.9% annually, according to Morningstar.

The good news: Many Money 70 investors are more patient than average. For example, while Vanguard Windsor II returned 3.8% annually over the past decade, investors in the blue-chip stock fund earned nearly all of that: 3.4% a year.

It just goes to show that you don’t need to try to outguess or outperform the market to be a successful investor. Just choose a sensible, long-term strategy and have the patience to hold on during inevitable bad times. This group of funds was designed to help you do just that.

See more on how we picked the funds and what changes we've made since last year.