Considering the fates met by one-time banking giants Wachovia ( WB), Washington Mutual ( WM) and IndyMac and not to mention Countrywide Financial, Lehman Brothers and AIG ( AIG), it would seem financial services mutual funds were the last places in which an investor should have been in recent months, right?

Wrong!

Excluding leveraged and "inverse" funds, which because of their unique structures virtually always dominate the upper and lower extremes of performance arrays, the six best open-end stock mutual funds in the third quarter were specialists in financial services.

And to add proof that contrary investing was carried to an extreme during the period, a pair of funds focusing on the much maligned real estate sector also made the accompanying table of the 10 best performing stock funds for quarter just ended -- excluding the leveraged and inverse players.

Investors who got into -- or already owned and decided to stick with--the financial services firms on the adjoining list during the summer financial maelstrom were rewarded double-digit percentage gains for their anguish.

Two of the financial services funds, John Hancock Regional Bank ( FRBAX) and Forward Banking & Finance ( HSSAX), each vaulted more than 20% during the quarter. Both are heavily invested in regional banking firms, as is FBR Small-Cap Financial Fund ( FBRSX), which also holds small mortgage and investment stocks.

The Rydex Series-Banking Fund ( RYKAX) achieved a gain of 12.1% during the quarter with more mainstream holdings such as Wells Fargo ( WFC), US Bancorp ( USB), HSBC ( HBC) and Bank of America ( BAC).

Slightly more diversified within the financial sector than RYKAX is the Burnham Financial Industries Fund ( BURFX), which in addition to banking firms such as Citigroup ( C) and JPMorgan Chase ( JPM), holds Met Life Insurance ( MET) and Ameriprise Financial ( AMP).

The only general investment fund on the list, Ridgewood Large-Cap Growth Stock ( STCIX), advanced 11.4% during the quarter with investments in blue-chip stocks such as IBM ( IBM), Google ( GOOG), Microsoft ( MSFT), Apple ( AAPL), Intel ( INTC) and Baxter International ( BAX).

Ridgewood Large-Cap Growth is the only fund in the table with gains for the latest quarter, the most recent 12 months and the past three years.

Surprise! Financial Funds Have Been Hot in 2008
Name (Ticker), Rating INVESTMENT OBJECTIVE 3-Month Total Return (%) 12-Month Total Return (%) 3-Year Annual Return (%) Minimum Initial Investment
J Hancock Regional Bank A (FRBAX), E- * Financial Service 24.45 -20.07 -3.19 1,000
Forward Banking & Finance A (HSSAX), E- * Financial Service 22.65 -14.20 -5.05 4,000
FBR Small Cap Financial Fd (FBRSX), E- Financial Service 14.49 -7.14 -3.63 2,000
Rydex Series-Banking Adv (RYKAX), E- Financial Service 12.11 -35.46 -13.40 2,500
Burnham Financial Services A (BURKX), E * Financial Service 11.90 -11.95 -0.42 2,500
Burnham Financial Industries A (BURFX), C+ * Financial Service 11.72 -4.59 6.72 2,500
RidgeWorth Lrg-Cap Growth Stock A (STCIX), D+ * Growth-Large Cap 11.36 0.06 8.54 2,000
Hilliard-Lyons Senbanc Fund (SENBX), E- Financial Service 10.51 -37.03 -14.62 250
Neuberger Berman Real Estate Fund (NBRFX), C Real Estate 10.11 -7.38 6.95 1,000
Stratton Monthly Dividend Reit Shs (STMDX), C- Real Estate 9.29 -5.93 4.58 2,000

* Front-end sales charge indicated.
Data as of 9/30/2008.
Source: TheStreet.com Ratings & Bloomberg
For more information, check out an explanation of our ratings.
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.