Stock mutual funds have their best first quarter since 2006

By John Waggoner, USA TODAY

The average stock mutual fund jumped 6% the first three months of 2011, giving investors their best first-quarter returns since 2006.

Growth funds look for stocks of companies with strong potential earnings growth.

The funds with the hottest returns for the quarter also came with the most risk, because many use futures and options to turbocharge their returns.

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Direxion Energy Bull 3X Shares, the top-performing fund for the quarter, soared 53.9% on a gusher of rising oil prices. The fund aims to rise 3% for every 1% gain in its underlying index but also fall three times as much.

Its companion fund, Direxion Energy Bear 3X shares, was one of the worst performers. It aims to rise 3% for every 1% decline in its index. The fund plunged 41%. Investors would have to earn 75% just to get even from their first-quarter losses.

Top sector funds:

•Natural resources funds, pumped up by big gains in oil and mining stocks, gained an average 13.7%. Global natural resources funds jumped 9.31%.

•Commodity funds rose 7.4%, boosted by rising food prices, as well as gains in energy, silver and cotton.

•Biotechnology funds gained 7.4%.

WINNERS & LOSERS: Best and worst-performing funds in Q1
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International funds eked out a gain despite European debt woes, Middle East unrest and the Japanese earthquake and tsunami. The average world stock fund gained 2.6%. Even more surprising: European region funds were the best of the international group, soaring 5.3%.

USA TODAY's Q1 FUND REPORT

How the largest stock funds performed in the first quarter of 2011
Best- and worst-performing funds of the first quarter
Best and worst funds of the last 5 years
Best and worst funds of the last 10 years
How fund categories fared in the first quarter
Emerging markets funds, slowed by China, gained just 0.4% the first quarter.

Nearly all categories of stock funds showed gains the first quarter. Funds that bet on a bear market went into hibernation. Bear funds, which rise when the stock market falls, slid an average 8.9%. Latin America funds tumbled 1.3%. Japan funds fell an average 9.6%.

The funds' stellar showing the past two years has resulted in one big change among investors, says Tom Roseen, senior analyst for Lipper.

"In 2009 and 2010, most money went to bond funds," Roseen says. "But money is now flowing back into equity funds."

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