If You Could Make Only One Investment...

Music geek that I am, I'm a big fan of the BBC's "Desert Island Discs" game: If you were stranded for the rest of your life, which eight albums would you want for company?

Investing geek that I am, I can't resist changing the question and raising the stakes: If you could make only one investment for the rest of your life, how would you proceed?

Better living through cheating

Me? I'd cheat. When it comes to music, box sets like, say, AC/DC's Bonfire are the only way to go. And with investments, mutual funds should be your vehicle of choice. Why place all of your hard-earned moola on a single horse, when you can spread your bets around and sleep peacefully with a top-notch fund?

On that front, Vanguard 500 Index (VFINX) and the SPDRs (SPY) exchange-traded fund (ETF) are perfectly viable options -- low-cost S&P 500 trackers that rise and fall with a benchmark that counts General Electric (NYSE: GE), Johnson & Johnson (NYSE: JNJ), and JPMorgan Chase (NYSE: JPM) among its top holdings.

And these days, of course, you can easily track other bogies. Value hounds may gravitate toward iShares Russell 1000 Value (IWD), an ETF that specializes in the relatively buttoned-down likes of Verizon (NYSE: VZ) and Kraft Foods (NYSE: KFT). If you're looking for a growthier vehicle, that's not a problem, either. The iShares Russell 1000 Growth (IWF) ETF is a simple way to dial up your exposure to racier plays such as Starbucks (Nasdaq: SBUX), a company with five-year earnings growth estimates in excess of 20%.

That said, investing in even rock-solid index funds means that you're destined to lose to the market: The most you can realistically expect is for your funds to lag their benchmarks each year by about the amount of their expense ratios.

The good news
Fortunately, you can do better than that -- much better. There are world-class actively managed funds out there with fortunes that aren't tied to an index and managers who have shellacked the market over the course of many years. The question is how to find them.

As the Fool's resident fund geek, I've found that focusing on managerial tenure goes a long way toward helping you zero in on a short list of worthies. A fund may have a stellar track record, but if the stock picker who earned those high marks isn't still in charge, that performance history doesn't tell you a thing about the fund's forward-looking prospects.

A fund's price tag is a critical piece of the puzzle, too. Expense ratios come right out of your returns, after all. All else being equal, the lower they are, the bigger your nest egg.

But all else isn't equal
There are plenty of other variables, of course, and considering them all (so you don't have to!) is the reason we started Champion Funds, the Fool investment service that I head up. We aim to cover all the data points, then focus like a laser beam on just those funds with the potential to whip the market over the next three to five years and beyond.

So far, our picks have beaten the market by a double-digit margin since we first set up shop, and that outperformance has come amid far less volatility than you'd experience with a portfolio of stocks -- much less a single pick! Indeed, all of our recommendations have made money for the service's members since we gave 'em the nod.