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Your first step is determining whether you'll pick funds entirely on your own or rely on the help of a broker, financial planner or other adviser.

If you seek help, you will likely pay a load when you buy your fund shares. Studies show that the commission does not buy better fund management. In general, loads compensate the sales people who sell the funds to their clients.

If you're picking your own funds, there's no point in paying a load for advice that you haven't gotten. On the other hand, if you go to advisers for help, don't begrudge them the commission you owe for their advice.

If you decide to stick with no-load funds, you will slice the universe of funds you need to consider roughly in half. Once you find a no-load you like you can purchase shares directly from the fund company, or through a discount broker, which may or may not charge its own transaction fee.

Study past results

This is arguably the trickiest part of the process, because past performance is no guarantee of future returns. Not even the best and brightest beat the averages every year.

Focus on three- and five-year returns rather than one-year figures. A ten-year return is even better, especially if the fund is still managed in the same way (and by the same person) now as then and hasn't changed in some fundamental way. The longer a manager has achieved superior results, the more confident you can be that those numbers are meaningful.

Concentrate on the consistency of a manager's return. Even five-year results can be exaggerated by one spectacular year.

Examine how a fund has done each year of the period you're looking at relative to its peers or against an appropriate benchmark index (such as the S&P 500 index for large-company funds or the Russell 2000 for small-company funds).

Incidentally, there may be times when it makes sense to invest in funds with less-than-stellar records. For instance, aggressive-growth funds that invest in small companies with strong earnings momentum have performed poorly over much of the past three years. If you want to invest in such a fund because you feel those kinds of stocks are attractively valued or because you need to round out a portfolio, be prepared to accept a fund with poor recent results.

Who runs the fund?

Look at how long the most experienced manager involved in running the fund has been associated with the enterprise. If the current manager took over the job in the past few years, the fund's long-term record is probably meaningless. This may not disqualify a fund from consideration, but it does serve as a yellow light.