Mutual funds offer investors the benefit of a diversified portfolio and professional management of that portfolio. But all investment funds involve some level of risk, and not all mutual funds are created equal.
Whether your investment goals involve aggressive growth during your working years or a more conservative approach as you near retirement, one of these top-rated mutual funds could serve your financial strategy well. Here are the 20 best mutual funds to buy:
|20 Best Mutual Funds for 2018|
|Company||Mutual Fund Symbol||Fund Name||Type||Expense Ratio||Total Assets||5-Year Return|
|Laudus Trust||LGILX||Laudus U.S. Large-Cap Growth Fund||Large-cap stock||0.75%||$1.72B||13.08%|
|Schwab Capital Trust||SWPPX||Schwab S&P 500 Index Fund||Large-cap stock||0.09%||$24.02B||13.98%|
|Vanguard Index Funds||VTSMX||Vanguard Total Stock Market Index Fund Investor Shares||Large-cap stock||0.16%||$517.94B||13.79%|
|iShares Trust||IJH||iShares Core S&P Mid-Cap ETF||Mid-cap U.S. stock||0.12%||$36.6B||14.17%|
|Vanguard Index Funds||VOE||Vanguard Mid-Cap Value Index||Mid-cap U.S. stock||0.08%||$13.73B||14.9%|
|T. Rowe Price||PRDMX||T. Rowe Price Diversified Mid-Cap Growth||Mid-cap U.S. stock||0.87%||$601.94M||12.94%|
|WisdomTree Trust||DES||WisdomTree SmallCap Dividend Fund||Small-cap U.S. stock||0.38%||$2.06B||14.85%|
|Vanguard Horizon Funds||VSTCX||Vanguard Strategic Small-Cap Equity Fund||Small-cap U.S. stock||0.29%||$1.7B||15%|
|Schwab Capital Trust||SICNX||Schwab International Core Equity Fund||International stock||0.86%||$755.99M||8.47%|
|Fidelity Investment Trust||FTEMX||Fidelity Total Emerging Markets Fund||International stock||1.39%||$228.94M||3.62%|
|Dodge & Cox Funds||DODBX||Dodge & Cox Balanced||Balanced mutual fund||0.53%||$15.38B||12.67%|
|Vanguard Valley Forge Funds||VBINX||Vanguard Balanced Index Fund Investor Shares||Balanced mutual fund||0.22%||$31.36B||9.01%|
|Vanguard Scottsdale Funds||VSIGX||Vanguard Intermediate-Term Government Bond Index Fund Admiral Shares||U.S. government bond||0.07%||$2.06B||1.24%|
|Fidelity Income Fund||FGOVX||Fidelity Government Income Fund||U.S. government bond||0.45%||$4.45B||1.33%|
|Vanguard Bond Index Funds||VBLTX||Vanguard Long-Term Bond Index||Investment grade bond||0.16%||$9.52B||3.8%|
|TCW Funds||TGCFX||TCW Core Fixed Income I||Investment grade bond||0.49%||$1.72B||2.47%|
|Fidelity Summer Street Trust||FAGIX||Fidelity Capital & Income||High-yield bond||0.74%||$10.83B||7.89%|
|Vanguard Fixed Income||VWEHX||Vanguard High-Yield Corporate Fund||High-yield bond||0.23%||$21.78B||6.12%|
|Nuveen Municipal Trust||FLAAX||Nuveen All-American Municipal Bond A||Tax-exempt bond||0.70%||$3.21B||4%|
|Vanguard Specialized Funds||VGSIX||Vanguard REIT Index Fund Investor Shares||REIT||0.26%||$62.48B||10.22%|
The Top 20 Best Mutual Funds to Invest In
To help you identify strong mutual funds to invest in for your retirement plan or other financial goals, check out these best-performing mutual funds along with a breakdown of their assets, types of investments, expense ratios and historical returns based on reports from Yahoo Finance. Choose from the 20 top-rated mutual funds:
LGILX is a long-term, top-performing mutual fund with a 10-year average return of 9.37 percent. The fund’s holdings are concentrated in the technology, healthcare and consumer discretionary sectors, with Amazon (AMZN), Google (GOOGL) and Microsoft (MSFT) accounting for nearly 20 percent of assets.
Other significant holdings include UnitedHealth Group (UNH), Netflix (NFLX), Facebook (FB) and Visa (V). The fund invests at least 80 percent of its net assets in equity securities of large U.S. companies with a market capitalization of at least $3 billion at the time of investment. Investors seeking to beat market returns might consider this large-cap growth fund that’s actively managed.
SWPPX attempts to track the returns of the Standard & Poor’s 500 index. As one of the top mutual fund companies, Schwab offers this index fund that invests at least 80 percent of its net assets in stocks represented in the S&P 500 in the same weight as the index. To minimize the return gap between the fund and the index, the fund might also invest in managed futures contracts. This fund provides a core holding for a diversified investment portfolio.
In the broad-based index fund category, this is one of the best index funds for individuals interested in investing in mutual funds. Created in 1992, VTSMX mirrors the entire U.S. stock market, including small-, mid- and large-cap growth and value stocks. Vanguard, a top mutual fund company, claims that low costs, broad diversification and tax efficiency are what make this fund so popular — accounting for $517.94 billion total assets under management.
Last year, investors in mid-cap index fund IJH enjoyed an outsized 30.07 percent return, handily beating the Mid-Cap Blend sector’s 12.85 percent return, according to Morningstar. iShares Core S&P Mid-Cap EFT fund seeks to represent the S&P Mid-Cap 400 index. The company touts IJH’s quality combined with its low cost of only 0.07 percent. A major appeal of the fund is in creating a core portfolio of investments seeking long-term growth while keeping fees low and seeking tax efficiencies.
Value funds are popular among investors looking for a deal. Value stocks are defined as the stock of companies that might be temporarily undervalued by investors. These companies tend to be fundamentally sound, but for some reason their stock price hasn’t kept pace with their market sector. Value funds, such as the Vanguard Mid-Cap Value Index, seek to capitalize on the underlying growth potential of these companies. Vanguard Value Index managers seek to track the performance of the CRSP U.S. Mid-Cap Value Index, which measures the investment return of mid-capitalization value stocks.
PRDMX’s objective is to provide long-term capital growth through investing in growing mid-cap firms with projected fast-earnings growth. Although it might have a greater risk than investing in more conservative large-scale companies, it offers the potential for greater rewards.
DES is designed to track the investment returns of the U.S. dividend-paying small-cap firms. The top four holdings are Vector Group Ltd. (VGR), CVR Energy Inc. (CVI), Covanta Holding Corp. (CVA) and Pattern Energy Group (PEGI). Small-cap companies that pay dividends represent strong firms and are an important component of long-term returns for this asset class, according to the Royce Funds, a small-cap investing specialist.
VSTCX seeks long-term capital appreciation through investments in small-capitalization domestic equity securities based on the fund advisor’s assessment of the securities’ relative return potential. The fund advisor will attempt to create an appropriate balance of securities that represents strong growth potential while representing reasonable valuations relative to their industry peers.
Small capitalization firms might be more volatile than larger-cap companies, so returns can be harder to predict, according to Vanguard. Mutual fund rating company Morningstar measures VSTCX’s risk level as average in its category and assigned the fund a three-star investment rating.
Related: 6 Best Long-Term Investments
SICNX, a diversified international stock fund, strives for income and capital appreciation. It invests the majority of its funds in more developed markets, and the rest in emerging markets. Thus, this fund is suitable for investors comfortable with a certain level of risk that might arise from changes in interest rates, currency exchange rates as well as economic and political circumstances.
FTEMX, an actively managed, balanced emerging markets fund, has exposure to both stocks and bonds from countries with low- to middle-income economies. The fund invests approximately 60 percent of the fund assets in equities and 40 percent in debt securities of all quality levels. The fund managers examine the company’s structure, price, liquidity, economic risk and more. FTEMX is a riskier fund, appropriate for investors looking to tap into the international sector.
Founded in 1931, this actively managed, best-balanced fund has a long history. It strives for income, conservation of principal and growth. These goals are accomplished with diversified holdings of stocks and bonds. The fund managers use a value-based approach and seek to invest in firms with long-term positive prospects and current low valuations.
The fund owns between 25 and 75 percent in equities and the remainder in debt securities. Managers evaluate the company’s financial strength, competitive advantage, business quality, reputation and more.
VBINX, a low-fee Vanguard fund, offers investors a one-stop mutual fund with access to the entire financial market. Approximately 60 percent is invested in a representative sample of the U.S. stock market and 40 percent in bonds tracking the U.S. bond market. The fund is a comprehensive investment and is a suitable core holding in a diversified portfolio.
VSIGX is one of the best bond funds in our ranking. The fund gives investors exposure to the fixed-income markets, spanning the U.S. Treasury, U.S. government agencies and foreign debt that’s guaranteed by the U.S. government. The underlying debt has maturities between three and 10 years. Although the fund’s principal value might vary with changes in interest rates, the default risk for U.S.-related debt is negligible. In other words, it’s unlikely that the U.S. will go bankrupt. This fund offers investors an opportunity to participate in the U.S. government debt markets with one fund.
This diversified government bond fund strives to provide high income and preserve capital. The fund invests at least 80 percent of its funds in U.S. government securities and other debt instruments related to the U.S. government. With 20 percent of its assets, the fund might use more complex and risky investment leverage strategies. The fund’s value might go up or down depending upon changes in interest rates, as bond values tend to fall as interest rates increase.
Long-term bonds offer investors the opportunity for higher fixed-income returns with the downside of greater volatility. This ultralow-fee, long-term bond fund gives investors broad exposure to U.S. investment-grade bonds with maturities longer than 10 years. Approximately 60 percent of assets are in corporate bonds and 40 percent are allocated to longer-term U.S. government bonds.
Learn: How to Choose the Best Bonds
The fund invests in all corners of the fixed-income debt markets, including government, corporate, asset-backed and mortgage-backed securities. TCW’s goal is to give investors maximum income and with better-than-average total long-term returns.
FAGIX is an average-risk bond fund that strives for higher income by investing in both equity and debt securities. The fund includes investments in defaulted securities and emphasizes lower-quality and troubled debt in an attempt to obtain higher returns.
The Vanguard high-yield or “junk bond” fund invests in medium- and lower-quality corporate bonds. Created in 1978, this actively managed bond strives to capture consistent income. Similar to Fidelity’s high-yield bond fund, this investment is appropriate for investors willing to take on additional risk in exchange for a potentially higher yield.
FLAAX is an actively managed U.S. municipal bond fund that’s appropriate for high-tax-bracket individuals seeking federally tax-exempt income. The longer-term bond fund strives to preserve capital and provide a stream of tax-free income.
VGSIX is a real estate index fund that invests in a variety of real estate investment trusts or companies that buy office buildings, hotels and other types of real estate. REITs can offer diversification to an existing stock and bond portfolio. REITs are required to pay out 90 percent of their annual income and might provide investors an income stream. As with stocks and bonds, REIT prices can also go up and down.
Click through to learn how to invest in the nine best index funds.
More on Mutual Funds
- 6 Best Fidelity Mutual Funds
- Analyze Mutual Funds With the Morningstar Style Box
- How Does a Mutual Fund’s Expense Ratio Affect Returns?
Methodology: To compile its ranking of the best mutual funds, GOBankingRates evaluated each institution’s historical returns, expense ratios, assets under management and its investment offerings based on reports from Yahoo Finance and individual investment companies.