Mutual funds are the last, best hope of the part-time investor. The challenge is to find some good ones that will sustain you over the years. Within their class, money-market funds are all reasonably similar in performance. Bond-income funds also don't deviate very much from the average, so when you choose one you can't go too far wrong. The struggle is to find a decent fund that invests in stocks.

The golden rule is not to buy a mutual fund just because it led the performance charts last year. The reason is simple, clear and logical -- and almost no one heeds it it: When a portfolio of stocks has already shot up in value, it is not likely to shoot up again by the same amount. The big growth that the fund manager expected when he bought those particular stocks is already over.

Instead of being seduced by last year's best performers, look for a fund with a consistently strong record. Most importantly, this means funds that do not throw away, in a bad market, all the gains they made when the market was good.

Forbes magazine's annual survey of mutual funds (in its Aug. 27 issue this year) is your single best source for judging funds. It gives mutual funds two separate grades -- one for how well they do in good markets and another for performance when times are bad -- and prints a special honor roll of funds with top achievement overall.

In their sales material, mutual funds usually show their past peformance over the life of the fund for at least the past 10 years. But it is impossible to use this information to compare two different funds. They all start measuring their performance on different dates. Changing the starting date by just one month can totally distort how well one fund did relative to another.

One last rule: It is unwise to buy a brand-new fund. They are usually brought out to capitalize on some recent excitement in the market -- like a special fund for high-tech stocks or hospital shares. But by the time the fund is marketed, the shares have already had their day.

Over the long run, mutual funds that invest in stocks have done better than the stock-market average overall. But the rosy data published by the mutual-fund trade group, the Investment Company Institute, overstates the case. It suggests that funds have done nearly 100 percent better than the market average over the past 10 years. But the ICI doesn't count the performance of mediocre mutual funds that have gone out of business. Also, the method it uses for weighting the funds tends to give extra emphasis to those that do the best.

An alternative measuring system proposed by Forbes shows that, over the past decade, the higher-risk, aggressive growth funds substantially outperformed the market in general (a compounded 14.4 percent a year for these funds, versus 11.2 percent for Standard and Poor's 500 stock average). More conservative, growth-and-income funds were also superior (12.5 percent a year), while the average growth fund turned out to have, well, average growth (11 percent a year).

But the key for investors is how well the funds perform relative to how you might fare by investing with the help of a stockbroker, Sheldon Jacobs, editor of the No-Load Fund Investor, told my associate, Virginia Wilson. On that score, the mutual funds would probably win hands down.

Comparing mutual-fund fees used to be simple. Load funds charged a sales fee of up to 8.5 percent (which was taken out of your investment), while no-load funds were sold by mail without sales commissions. But lately, some funds from both camps have been finding new ways of getting money from investors.

There are low loads, with sales charges in the area of 3 percent; back-end loads, which charge whenever you withdraw money, and deferred loads, which charge if you withdraw your original investment within the first few years. There are 12(b)1 funds, which continually deduct the fund's sales expenses from its assets, thereby reducing the value of your shares. There are start-up fees, distribution fees, maintenance fees and more on top of annual management fees in the area of 0.75 percent of assets. These fees should be listed somewhere in the fund's prospectus, although it isn't always easy to find them.

Investors who plan to switch from fund to fund, or to write checks on a money fund, should be sure that they have a pure no-load investment, without any hidden or back-end fees to chew up your profits.