THERE’S yet more evidence that it makes sense to invest in simple, plain-vanilla index funds, whose low fees often lead to better net returns than hedge funds and actively managed mutual funds with more impressive performance numbers.

hen it comes to consistently beating the S&P 500, the successor to Legg Mason's legendary Bill Miller is likely to have a foreign accent -- or at least an investment focus outside the U.S. As the door mercifully closed on 2008, TheStreet.com Ratings parsed its database of stock mutual funds for any that have outperformed the S&P 500 total-return index during each of the past 10 calendar years. Only a quartet of internationally focused funds, listed in the accompanying table, passed the test.

For many stock and mutual fund investors, home ownership provides an important alternative avenue of investment that diversifies their overall portfolio. Real estate comprises one of only two asset classes that have outperformed inflation over time. However, homeowners face the same risk as owners of individual stocks: if the value of their home declines, then they can lose big.

As more details of the Bernie Madoff investment scandal unfold, plenty of investors feel panicked. After all, if the fat cats were robbed by hedge funds, how can the average investor protect a small account from fraud? The safest approach is to tuck cash into banks and Treasury bills, but there is another option: mutual funds.

ETFs (Exchange Traded Funds) can do amazing things. If you have the stomach for risk, the following new entries to world of ETFs can help you stay in the black when the market turns red.

While a bond is a debt security that represents the authorized issuer’s obligation to repay the principal plus interest of the debt, a bond fund is a pool of money that invests in bonds. Most bond funds pay higher dividends than CDs or money market funds, and are considered less risky than stocks. That’s why many financial planners recommend having these types of bond funds within investment portfolio, especially as we age.

Imagine this. You open your statement every month and decide to do an impromptu financial check up on your IRA. You go online and it takes you five to 10 minutes, at the most. You understand your investment, feel confident about your choice and confirm that you are on the right track to a successful retirement.

Hedge funds can generate massive returns in relatively short periods of time, and they can also go into financial crises just as quickly. What kind of investments can produce such diverse returns? One answer is distressed debt. The term can be loosely defined as the debt of companies that have filed for bankruptcy or have a significant chance of filing for bankruptcy in the near future.

What do Home Depot, Anheuser Busch, and Carmax have in common? Here’s a hint: Bank of America, American Express, and General Electric have the same thing in common. The answer is they are all investments by a “mutual fund” that does not charge you a load fee or annual expenses. You’ve no doubt heard of index funds that charge 0.15% or so a year in expenses. Well how does 0.00% sound? If you like free in your mutual fund, forget Vanguard or Fidelity. Instead, think Berkshire Hathaway.

As hedge fund titans face an intense grilling by congressional committees and thousands of hedge funds around the world close their doors, perhaps it is time to consider a new approach. A hedge fund structure offers investors many advantages such as maximum flexibility, but the model is sure to change under all the heightened scrutiny.