NEW YORK (Money Magazine) - When you focus on what really counts in fund investing, the class acts stand out quickly.

First, skip all the funds with assets of less than $100 million -- for technical reasons, it's relatively easy for a fund manager to put up good numbers when he has a small asset base, and that advantage disappears when new investors pour in.

For the same reason, ignore big funds that have grown so fast in recent years that they've had to alter their investment style. You can also disregard most new funds or those that haven't been run by the same person or team for several years.

(A few exceptions: The MONEY 50 includes Dodge & Cox International, a young foreign-stock fund managed by a team with a great record picking foreign stocks for Dodge & Cox Stock, and Vanguard Inflation-Protected Securities, which invests in inflation-protected Treasuries, or TIPS, a relatively new kind of bond.)

And naturally there's no point in looking at funds that are closed to new investors or restricted to institutional buyers.

After all that, a fund should pass three basic tests:

Nobel prizewinning economist William Sharpe has pointed out that the best predictors of strong future fund performance are low costs and low trading inside the portfolio.

It's not hard to guess why.

Based on historical returns, Wharton economist Jeremy Siegel expects stocks to beat bonds by an average of three percentage points a year over the long run. (And lots of market observers think Siegel is too bullish.)

Buy a stock fund in which operating expenses consume the average of 1.5 percent of assets every year and you've already given up half that margin.

Meanwhile, brokerage fees and other costs from the fund's trades can be as high as or higher than the fund's published expenses, according to estimates by the Plexus Group, a consulting firm that tracks trading costs.

Fast-trading funds potentially add to your tax bill too. In other words, if you pick a high-cost, high-turnover fund, you're already deep in the hole.

So every fund in the MONEY 50 has below-average operating expenses for its category -- in many cases, far below average -- as well as a low turnover rate. No exceptions.

The fund industry scandals of recent years have clearly shown that some investment firms are better than others at safeguarding their investors' interests -- and when it comes to your family's money, there's no reason to accept anything less than high fiduciary standards.

In 2004, Morningstar launched a new kind of fund rating called fiduciary grades.

These rankings, from A to F, are based on five factors: the fund company's status with regulators, such as the SEC and the New York State attorney general's office; quality of the board of directors; manager incentives; fees; and corporate culture.

In the end, for the MONEY 50, we ruled out any fund that received a fiduciary grade of less than B. In the few instances when funds didn't have a grade -- Morningstar is still building its list -- we made our own judgment.

Since fund returns are so unpredictable, the best way to use performance records is as a tool to weed out the obvious losers and one-hit wonders.

Instead of insisting on category-crushing performance for the funds on the list, we simply focused on those that beat 60 percent of similar funds over the past five years. (We made some exceptions with specialty funds.)

Are the 50 funds listed here the only ones that pass all these tests? No, but we wanted this list to be the best of the best.

To make our final selection, we used a combination of quantitative and qualitative criteria.

Where there were several funds that ranked similarly on fiduciary ratings, for example, we gave the nod to those with the lowest expenses and the most consistent investment approach.

And since lots of 401(k) plans use just one or two fund groups, we tried to include picks from as many companies as possible.

If you already own funds that don't make this list -- or have a 401(k) that doesn't include them -- don't worry.

Sharp-eyed readers of Money magazine will note that this list used to be called the MONEY 100, so there are plenty more worthy funds out there. The goal is to make sure the funds in your portfolio get the big things right-low costs, management integrity and consistency over razzle-dazzle.

If your funds don't pass those tests, and the tax consequences aren't too great, consider switching.

You can also use these funds for any new money you put in the market, and for any investments you make after you have fully contributed to your company's 401(k) plan.

Although there's no way to predict whether all of these funds will come out winners, we're confident that a portfolio built around the MONEY 50 has a head start in the race.