Mutual fund investors should get a feeling of satisfaction when they read their year-end statements.
A fourth-quarter blip padded the already huge gains that recovering stocks and funds enjoyed in 2009.
Among the year's top performers: Funds that focused on high-tech stocks, materials producers and gold.
The best performances came from parts of the market that investors will benefit from a recovery in the world's economy.
Global science and technology funds returned an average 8.5 percent for the October-December quarter and 69.5 percent for the year, according to fund tracker Lipper Inc.
The latest figures reflect trading through Thursday, and so don't include the final four trading days of the fourth quarter.
The Standard & Poor's 500 index is up 6.7 percent for the quarter and 24.9 percent for the year.
Meanwhile, funds that invest in the stocks of basic materials producers returned 10.3 percent in the quarter and 66.8 percent for the year as commodities prices jumped because of a drop in the dollar.
Commodities are priced in dollars and become more affordable to foreign buyers when the dollar falls.
Prices for commodities also rose as expectations grew that demand for goods and materials would pick up as economies strengthened, particularly in developing countries like China, Brazil and India.
Gold funds returned 8.5 percent in the fourth quarter and 52.9 percent for the year as the dollar fell.
Diversified U.S. stock funds made an average return of 31.7 percent for the year. That compares with a negative return of 37.5 percent in 2008. The funds tend to have varied holdings instead of focusing on a particular industry.
Hank Smith, chief investment officer at Haverford Investments in Radnor, Pa., said so many investors were fearful of what happened in 2008 that they pulled out of the market before it began to bounce back.
Many haven't returned.
"Fear hasn't gone to greed," he said. "They're putting money into bond funds at a huge rate and probably at the wrong time."
Smith contends that investors who left the market should be looking to areas like consumer staples and health care that got left behind in the market's rally rather than plowing money into areas that have already done well and now risk losing steam.
The stock market is still down by about one-third from its peak in October 2007 but the returns from the year are strong sign that investors expect the economy will continue to recover in 2010.
Investors weren't always as confident. The year started with stocks continuing the slow-motion crash that began in 2008.
By March, major stock benchmarks such as the S&P 500 index and the Dow Jones industrial average skidded to 12-year lows.
It was only after the selling reaching that crescendo that the market was able to begin one of the strongest rebounds in generations.
The nine-month run in stocks has left mutual fund investors with massive annual returns that they're not likely to be seen again, analysts say.
Returns in some parts of the market were so strong that analysts worry bubbles could be forming. Latin American funds returned 110.1 percent for the year.
Not every investment did well, however. Funds that invest in Japan, whose economy has struggled, saw a negative average return for the quarter and a modest return for the year.
Short-bias funds, which bet against gains in stocks and are a hedge during a bear market, recorded a negative average return of 42 percent for the year.
The recovery in 2009 gives investors a chance to reconsider where they put their money and how much they should set aside in safer investments.
Smith said those investors who managed to stay invested and are sitting on the year's big returns should consider locking in some of their gains.
He expects the stock market will continue to climb but not before enduring a big retreat as investors wait for the economy to heal.
"A safe prediction for 2010 is the stock market will experience a correction defined as 10 percent or more," he said. "You can't be criticized for taking some profits. And I think that's a fairly easy call to make."
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