When investors hand over their money to a mutual-fund manager, they are betting he or she will make that stake grow over a period of time. The ultimate measure of that goal is to monitor a fund s annual return and your portfolio s bottom line.

But should investors care about how the manager posted that return? After all, there are many factors that can impact performance, and each can tell investors a lot about the way a person is running the offering. The manager could have made an outsized bet on one hot stock or a certain sector or industry. Maybe the parent company cut the fund s annual expense ratio, taking less of a bite out of returns. We think investors should know whether it s one or the other that is responsible for putting money in their pockets.

One impact on fund performance that goes relatively unnoticed by investors is the turnover rate. If a fund has a turnover rate of 300%, that means the fund flips its portfolio three times a year and incurs the costs that come with those moves. Various studies over the last 40 years have shown there is a negative correlation between trading costs and fund returns. That makes sense because every time a manager buys or sells a stock, he has to pay a commission fee. A recent study even correlated fund turnover to gender, experience and geographic location.

This week, we turn the spotlight on turnover rates. We started with a universe of 3,512 funds that have turnover rates in the top 25% of their respective Lipper categories. In other words, they had the lowest annual rates. We also screened on three- and five-year performance and low fees. We were left with the 14 funds listed below. For context, Morningstar says in the past the average equity fund usually has had a turnover rate around 100%, with small caps trading a little more on average than large caps.

We could have conducted this screen by simply looking for the funds with the lowest overall turnover rates. But that would have left us with a long line of conservative index funds. Indeed, we have always equated high turnover rates with funds that are more aggressive than a product that simply tracks a static benchmark. Ultimately, any trading costs regardless of whether the fund has a turnover rate of 1% or 100% will be reflected in the expense ratio.

Regular readers of this column will recognize many of the funds below. Amana Growth, Amana Income, the Royce funds, Croft Value, Auxier Focus, Wasatch 1st Source Income Equity and Westport have made other screens for low minimums, long-term performance, manager tenure and low fees.

The Criteria: The funds on the table below have annual turnover rates that are in the lowest 25% of their respective Lipper categories. In addition, the funds are in the top 10% of those same groups in terms of returns during the trailing three- and five-year periods. There are open to new money, require a minimum investment under $5,000 and charge an annual expense ratio under 1.5%. We did not include funds that charge a sales load.

Recipe

Fund Type = *
Annualized 3-Year Return (%) = Display Only
Rank in Classification (%) (3 year performance) <= 10
Annualized 5-Year Return (%) = Display Only
Rank in Classification (%) (5 year performance) <= 10
Expense Ratio <= 1.5%
Load Fund (type) = No Load
Minimum Initial Investment <= $5,000
Open to New Investors = Yes
Total Net Assets ($ millions) >= 50
Year-to-Date Return (%) = Display Only
Turnover Rate (in classification) <= 25%

* Does not include fixed income offerings.