Mutual funds help you build a diverse portfolio and eliminate the need to research stocks and other assets individually. Although they’re generally a safer investment than individual assets, choosing the right mutual funds can be a daunting process, as the options range from incredibly mild to extremely risky. GOBankingRates has compiled some of the best funds of 2022 to help you take the guesswork out of choosing which funds are best for you.
How We Chose the Funds
To identify the best mutual funds for 2022, GOBankingRates looked at a number of factors, including:
- Year-to-date and long-term performance
- Years since fund creation
- Tenure of fund managers
- Morningstar rating of 5
- Brokerage fees
- Expense ratio
Also considered were comparative risk and income for different types of mutual funds. Here are 12 of the best for 2022.
Best Stock Mutual Funds for Low Expense Ratio
The expense ratio is the percentage of a fund’s assets that go to operating expenses. A lower number is better because it means more assets are invested.
BlackRock Mid-Cap Value Fund Investor A Shares
This high-performing fund invests at least 80% of its assets, plus borrowings for investment purposes, in the stocks of mid-cap companies. The fund has slightly higher-than-normal risk — not surprising for a stock fund investing in mid-size, as opposed to large-cap, companies.
- Year-to-date performance: -10.32%
- Five-year performance: 11.79%
- 10-year performance: 12.06%
- Expense ratio: 1%
Madison Dividend Income Fund Class Y
The Dividend Income Fund from Madison aims to generate income and growth by investing in securities of dividend-paying companies with market caps of over $1 billion. Typically, 80% of the fund’s net assets include dividend stocks.
- Year-to-date performance: -11.98%
- Five-year performance: 12.21%
- 10-year performance: 12.70%
- Expense ratio: 0.91%
Putnam Large Cap Value Fund Class A
This fund from Putnam focuses on value stocks with the potential for capital growth, income or both. Most of the fund’s investments are U.S. common stocks. Major holdings include Microsoft, Bank of America Corp. and Walmart.
- Year-to-date performance: -12.14%
- Five-year performance: 12.05%
- 10-year performance: 13.56%
- Expense ratio: 0.88%
Best Asset Allocation Funds
An asset allocation fund invests in a variety of different types of assets to increase diversity.
Janus Henderson Balanced Fund Class T
This fund prioritizes long-term capital growth while preserving capital and is balanced by current income. It generally invests 35% to 65% in equity securities and the rest in fixed-income securities and cash equivalents. The fund has an average risk rating and higher-than-average returns.
- Year-to-date performance: -19.33%
- Five-year performance: 9.46%
- 10-year performance: 9.57%
- Expense ratio: 0.82%
BlackRock Sustainable Balanced Fund Investor A Shares
This fund invests in a combination of assets, including stocks, fixed-income securities and derivatives. Although the allocation changes, fund advisors typically keep 25% in equity securities and 25% in senior fixed-income securities such as U.S. government and corporate bonds. The fund has higher-than-average returns and lower-than-average risk.
- Year-to-date performance: -17.63%
- Five-year performance: 8.46%
- 10-year performance: 9.65%
- Expense ratio: 0.76%
Fidelity Multi-Asset Income Fund
The Fidelity Multi-Asset Income Fund invests in equities, investment-grade and non-investment-grade bonds, cash and other assets, with 50% to 70% of its assets in equities and the remainder in debt securities, including non-investment-grade bonds. It has a lower-than-average risk profile and high returns.
- Year-to-date performance: -16.04%
- Five-year performance: 8.83%
- 10-year performance: N/A
- Expense ratio: 0.78%
Best Bond Mutual Funds
Bond funds diversify your portfolio while providing you with a regular source of income. Although returns are generally lower than you’ll find with stock funds, many bond funds — especially those that invest in investment-grade bonds — are also less risky.
Calvert Core Bond Fund Class A
This fund typically invests at least 80% of its net assets in investment-grade, U.S. dollar-denominated debt securities. Up to 5% of assets may be invested in junk bonds. Despite that, this is a lower-risk fund with high returns.
- Year-to-date performance: -11.40%
- Five-year performance: 3.84%
- 10-year performance: 4.22%
- Expense ratio: 0.74%
Payden High Income Fund Investor Class
The Payden High Income Fund invests in debt instruments and income-producing securities. Typically, 80% of its portfolio consists of corporate debt securities rated below investment grade, which makes the fund riskier than some, but it produces high returns.
- Year-to-date performance: -12.24%
- Five-year performance: 4.36%
- 10-year performance: 5.12%
- Expense ratio: 0.60%
Guggenheim Core Bond Fund Class P
The Guggenheim Core Bond Fund invests mostly in investment-grade fixed-income securities, which may include closed-end funds and exchange-traded funds. It’s a lower-risk fund with solid returns and low fees.
- Year-to-date performance: -14.06%
- Five-year performance: 1.70%
- 10-year performance: 3.26%
- Expense ratio: 0.79%
Most Established Funds With Long Track Records of High Returns
Each of the winning funds in this category has been around for at least 10 years and produced solid returns. None has an expense ratio higher than 1%.
Fidelity OTC Portfolio
This is a large growth fund that invests at least 80% of its assets in growth and value securities traded on Nasdaq or over the counter, which offers exposure to small- and medium-cap stocks. Over 25% is typically invested in the tech sector.
- Year-to-date performance: -33.32%
- Five-year performance: 15.81%
- 10-year performance: 18.37%
- Expense ratio: 0.80%
Fidelity Select Health Care Services Portfolio
This high-performing fund invests at least 80% of its assets in companies that own or manage facilities that deliver healthcare services, such as hospitals and nursing homes. Stocks make up most of the investments, giving the fund a higher-than-average risk profile.
- Year-to-date performance: -12.21%
- Five-year performance: 15.25%
- 10-year performance: 15.57%
- Expense ratio: 0.71%
T. Rowe Price All-Cap Opportunities Fund
The All-Cap Opportunities Fund from T. Rowe Price invests at least 65% of its assets in the stocks of American companies operating in sectors that T. Rowe Price has identified as having the fastest or greatest growth potential. It may also invest in foreign stocks. The fund is slightly more risky than average, and it offers high returns.
- Year-to-date performance: -26.23%
- Five-year performance: 17.46%
- 10-year performance: 17.15%
- Expense ratio: 0.76%
What Is the Average Mutual Fund Return?
Average mutual fund returns vary based on the mutual fund type. The best mutual funds to invest in span the gamut from exceptionally high returns to fairly modest returns, all of which are related to risk.
- Stock mutual funds — high risk: 12%
- Bond mutual funds — low risk: 5%-6%
- Money market mutual funds — lowest risk: Around 1%
When looking at returns, you should look at not only the year-to-date return, but also five-year, 10-year and lifetime appreciation.
What To Consider When Choosing a Mutual Fund
There’s no surefire way to pick winning mutual funds, but you can maximize your chances of achieving the right balance between growth and risk. If you’re early in your career and have many years before retirement, for example, you might choose funds that invest in riskier small-cap stocks with the potential to produce outsize returns. If you’re closer to retirement, on the other hand, you might opt for less risky funds, like those that invest in Treasury bonds or large-cap stocks, despite their generally smaller returns.
Some mutual funds, called target funds, select a mix of securities based on a target retirement date. Over time, and as that target date approaches, the fund managers rebalance the mix of assets to reduce risk. This is great for a “set and forget” retirement fund.
Keep in Mind
Fundamentally, investors should consider whether they want active or passive funds, whether the fees make sense to them and whether their portfolio as a whole is well balanced. While ranking the best mutual funds by performance is possible, volatility, fees and risk also matter.
John Csiszar contributed to the reporting for this article.
Data is accurate as of June 16, 2022, and is subject to change.
This article has been updated with additional reporting since its original publication.