A mutual fund is an investment company with assets overseen by a professional money manager. Individual investors purchase shares in a mutual fund, and the collective assets are used by managers to buy securities such as stocks and bonds, in line with the stated investment objectives of the fund. Mutual funds are popular with investors because they can offer instant diversification, as each share represents ownership in potentially hundreds of different stocks, bonds or other securities.
If you’re one of the 55% of Americans who think they don’t have enough money to invest, mutual funds can be a good option because minimum purchase requirements for well-known funds can be as low as $100. But because there are literally thousands of mutual funds available for purchase, many investors need help to know which ones are the best to invest in. GOBankingRates compiled information on top-performing mutual funds from large, respected money managers to help investors sift through all the data. The best mutual fund for you will be one that meets your investment objectives, has low fees and performs well over long time periods.
To help you evaluate your investment options, this guide to the best mutual funds will cover:
- The 6 Best Mutual Funds To Buy in 2019
- Schwab S&P 500 Index Fund (SWPPX)
- Vanguard Mid-Cap Value Index (VOE)
- Vanguard REIT Index Fund Investor Shares (VGSIX)
- WisdomTree SmallCap Dividend (DES)
- Dodge & Cox Balanced (DODBX)
- Schwab International Core Equity Fund (SICNX)
- How To Choose the Best Mutual Funds for Yourself
No one mutual fund is “the best” to buy for every single investor. The funds listed here are among the top performers in their respective asset classes and offer investors who might think they don’t have enough money to invest the chance to earn higher returns over time. For further diversification, investors can consider picking up a combination of these funds.
Here’s an at-a-glance look at the best mutual funds to invest in now:
|Best Mutual Funds for 2019|
|Fund Name||Symbol||1-Year Returns||5-Year Returns||Yield||Expense Ratio||Sharpe Ratio|
|Schwab S&P 500 Index Fund||SWPPX||19.89%||13.98%||1.95%||0.02%||0.97|
|Vanguard Mid-Cap Value Index||VOE||26.59%||14.90%||1.88%||0.07%||0.60|
|Vanguard REIT Index Fund Admiral Shares||VGSLX||12.21%||7.69%||3.12%||0.26%||0.19|
|WisdomTree SmallCap Dividend||DES||37.02%||14.85%||2.70%||0.38%||0.35|
|Dodge & Cox Balanced||DODBX||24.23%||12.67%||2.55%||0.53%||0.93|
|Schwab International Core Equity Fund||SICNX||12.24%||8.47%||2.53%||0.86%||0.30|
Investors looking to track the returns of the S&P500 might want to take a close look at SWPPX. The fund invests at least 80% of its assets in stocks represented in that index and carries them in the same weight as in the index. Its minuscule 0.02% expense ratio is well below the average large blend fund’s 0.96%, helping the fund’s returns match those of its underlying index. This is one of the best mutual funds to invest in for investors looking for the core of a diversified overall portfolio.
VOE is a passively managed, fully invested fund that trades on the New York Stock Exchange, making it an exchange-traded fund, or ETF. This Vanguard fund tracks the performance of the CRSP US Mid-Cap Value Index. Value stocks are those that appear to be undervalued or overlooked by investors, making them popular with investors who shy away from overvalued, over-hyped growth stocks. Value stocks tend to be less volatile and often pay a dividend, allowing investors to earn a return while they wait for capital appreciation.
VGSLX is a way for investors to access the real estate market via a fund that invests in real estate investment trusts that buy properties such as hotels and office buildings. The regular “investor” shares version of this fund is now closed to new investors, but you can buy this Admiral shares version for a $3,000 minimum investment. REITs traditionally offer diversification to a portfolio, as real estate values don’t trade in lockstep with the stock and bond markets. REIT prices can go up and down, just as with stocks and bonds, but the dividend the fund typically pays help to offset any share price fluctuations.
Before You Invest: What You Need to Know About Mutual Fund Fees
DES tracks the investment returns of dividend-paying small-cap firms based in the U.S. This fund is an ETF, meaning it can be bought or sold on the stock exchange through your broker. As of July 26, 2019, the fund’s top three holdings were Vector Group Ltd. (VGR), Terraform Power Inc. – A (TERP) and Pattern Energy Group (PEGI). According to the Royce Funds, a small-cap money manager, small-cap companies that pay dividends can provide strong total returns over the long run.
Established way back in 1931, this actively managed balanced fund has a larger minimum than some funds — $2,500 — but it has posted solid long-term returns. DODBX owns fixed-income securities like bonds but also invests between 25% and 75% of its funds in stocks. Stocks are selected on the basis of their future earnings, cash flow and dividends; those that are deemed undervalued with long-term prospects are considered. Dividends are distributed quarterly.
As the name implies, SICNX is a diversified international stock fund that is designed to be a core portfolio holding for investors. The fund is classified by investment research firm Morningstar as a large blend fund, and although it typically focuses on large- and mid-cap companies, it can also own small-cap stocks. The management team focuses on fundamentals, valuation and momentum to build a portfolio intended to exceed the long-term performance of the MSCI EAFE Index. Because hand-picking international stocks can be difficult for U.S.-based investors, this fund can be an option for those looking to diversify their holdings to include overseas investments.
Find Out: How Are Mutual Fund Returns Calculated?
Mutual funds can be a great option for a beginning investor, but the more you know about your own investing style and needs, the more likely you are to select an appropriate fund. For example, if you’re a conservative investor who needs income, you likely won’t be satisfied with an aggressive growth stock fund that pays no dividends and fluctuates wildly.
Once you’ve settled on the type of mutual fund you want, do some research on the performance of various asset managers and the fees they charge. Also, ensure that your selection is truly diversified. Although most mutual funds have hundreds of different investments, some funds invest only in one particular sector, such as technology stocks. If you’re looking for true market diversification, you might be better served with a general S&P 500 stock fund, or even a total market fund.
Lastly, consider whether you want an actively or passively managed fund. Actively managed funds trade more frequently, as managers constantly seek opportunities, whereas passively managed funds rarely trade and usually attempt to replicate the performance of a static market index.
The bottom line is that when researching a fund, you shouldn’t get distracted simply by the one-year performance figures. Make sure you’re picking a fund that matches what you need out of an investment for the long run, in terms of cost, diversification, investment objectives and management style.
- ETF vs. Mutual Funds: Same Objectives, Different Methods
- The Complete Guide to ETFs
- Safe Investments With the Highest Returns in 2019
John Csiszar has worked for over 18 years in the financial services industry as a Certified Financial Planner and a Registered Investment Adviser. He has experience working both for a global wirehouse and his own RIA firm.