(MONEY Magazine) – What do you really want from your mutual fund manager? For most of us, it's pretty simple—you want the guy to beat the market, to prove he's better than average. If the fund specializes in large-capitalization stocks, that means outpacing the S&P 500 index. But most pros don't deliver: Fewer than one in five blue-chip stock funds beat the S&P over the past decade. Even more rare are funds that consistently bettered the market year in and year out. Bill Miller's Legg Mason Value, which has topped the S&P 500 for a record-breaking 13 years, was behind by more than two percentage points for the year as of mid-November. (For more on Miller, see the following page.) When we screened for big, diversified large-cap funds that were ahead of the market so far in 2004 as well as over each of the past five years, we found just five. That's five out of 3,300 contenders.

These five did well in the boom years of 1999 and 2003 as well as in the lousy markets in between and afterward. But hold on: Some of these funds carry risks that aren't apparent from their steady returns, and they are best avoided. Let's look at how each of the market beaters pulled it off, and what you can realistically expect from them in the future.

FIVE-YEAR RETURN: 3.6% (annualized) SALES LOAD: 5.75% EXPENSES: 0.66% PHONE: 800-421-0180

Fundamental is a value fund, which means that its team of four managers searches for overlooked or beaten-down stocks. In 2003, they loaded up on industrial companies, including Dow Chemical (DOW) and Deere (DE), which zoomed as the economy strengthened. The managers tend to hang on to winners, so about 25% of the portfolio is still in industrials, about twice the weighting in the S&P. The fund also has a 20% stake in foreign stocks, mostly European blue chips.

None of these bets are particularly radical. Like most of the American funds, Fundamental is huge—it has $22 billion in assets—and broadly diversified. It owns about 170 stocks spanning nearly every sector, including hefty stakes in some growth areas like media.

• WHAT YOU CAN EXPECT: This fund is a fine core holding. It may not always be able to eke out an advantage over the S&P, but it spreads its bets so widely that it shouldn't fall far behind either.

FIVE-YEAR RETURN: 9.3% (annualized) SALES LOAD: None EXPENSES: 1.37% PHONE: 866-777-8227

Cambiar couldn't be more different from Fundamental: It holds only 40 stocks in a portfolio of just $140 million. The goal of the five-person management team is to find companies that are trading at historically cheap prices but are poised to deliver big gains. "We're on the value side of the Mason-Dixon Line," says lead manager Brian Barish. "But unlike value investors, we want the business to be strong financially, not just cheap." To find these bargains, Barish and his team hunt for stocks in market niches that are troubled or neglected. That led them to Symantec (SYMC), the antivirus software maker, which they began buying at $5 (adjusted for stock splits), or just 10 times earnings per share, in 1999. "Back then computer viruses were not such a problem, and the software was viewed as a commodity," says Barish. The fund sold Symantec for $18 to $22 in 2002. (The stock's at $61 now; the price of being a value investor is that you often get out too early.)

• WHAT YOU CAN EXPECT: This fund is a good choice if you want a shot at big outperformance, as long as you can accept extra risk too. Given Cambiar's concentrated portfolio, a single stock pick can have a big impact, good or bad.

FIVE-YEAR RETURN: 7.7% (annualized) SALES LOAD: 5.5% EXPENSES: 1.29% PHONE: 888-843-7824

Manager Saul Pannell swings for the fences. He only wants stocks he thinks can gain 25% or more in the next year. To meet that goal, he invests in large and small stocks, as well as foreign equities. Some of his best results have come from turnaround situations and overlooked industries. In 2002, for example, Pannell saw potential in the push-to-talk technology developed by Nextel (NXTL), which had plunged to just $3 a share. The stock, which is now the fund's largest holding, recently traded at $27. With Pannell's success, Hartford Capital Appreciation has grown to $7 billion, which has hampered his ability to buy small stocks. Instead, Pannell has boosted holdings in foreign stocks, which make up more than a third of the portfolio.

• WHAT YOU CAN EXPECT: The fund's asset growth has begun to limit Pannell's go-anywhere style. That could make it harder for him to keep beating the market. It may be too late to buy this one.

FIVE-YEAR RETURN: 9.2% (annualized) SALES LOAD: 5.5% EXPENSES: 2.16% PHONE: 800-220-8888

Manu Daftary is the only manager in our screen who has topped the index annually going as far back as 1998. He says his chief goal is to avoid losing money. So when the market looks pricey, he increases the fund's cash position—it reached as high as 85% in 2001. At times, he even shorts stocks. He's also an extremely frequent trader—he often holds stocks for just a month or two. "I like to find stocks before institutional buyers find them," says Daftary. "And when the stocks reach their price targets, I sell." Recently his largest stakes included telecoms Nextel and NII Holdings (NIHD).

• WHAT YOU CAN EXPECT: Just about anything. If Daftary decides to get out of stocks again and he's wrong, this fund could lag the market by a long way. The fund's high 2.16% expense ratio will make it even harder for it to stay ahead. Move on.

FIVE-YEAR RETURN: -1.31% (annualized) SALES LOAD: None EXPENSES: 0.46% PHONE: 800-851-4999

This fund uses a computer-driven approach to edge past the S&P 500. First, manager John Cone ranks some 4,000 stocks by both value and growth potential, using factors such as price/earnings ratios and earnings momentum, as well as signals such as insider buying or selling. Then he selects about 120 growth and value stocks. "We don't know when the market will swing from growth to value, so we avoid loading up on one or the other," says Cone. This fund hasn't shot out the lights like others on this list, but over five years it has beaten the S&P by an annualized 0.75 percentage points.

• WHAT YOU CAN EXPECT: This is another core fund that is unlikely to underperform by a wide margin. That makes its market-beating record all the more inspiring.