When mutual fund investors receive their year-end statements, most will be uplifted by the fact that the Standard & Poor’s 500 Index is up 24.9% for the year through Dec. 24, according to Lipper data.

The best-performing sector is global science and technology, with these funds up 69.5% for the year, followed by basic material funds, up 66.9%, largely due to the rise in commodities prices. Gold funds are on track to deliver average returns of 52.9%, and diversified U.S. stock funds are up 31.7%.

Despite these stellar returns, investors have pulled $36 billion from U.S. stock funds and placed $357 billion into bond funds. As Hank Smith, chief investment officer of Haverford Investments, told the Associated Press, “Fear hasn’t gone to greed. [Investors] are putting money into bond funds at a huge rate and probably at the wrong time.”

Smith believes that the valuations of consumer staples and healthcare are still compelling and that these stocks will deliver strong returns in 2010.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.