Most effective mutual funds of 2019
Use these recommended mutual and exchange-traded funds to create a portfolio that’s created to last.
When Money magazine introduced the cash 70 list in 2007, the investing landscape sure was different. Exchange-traded funds were just coming onto the scene, and also the merits from the strategy guiding them and index mutual funds remained as the topic of great debate.
Fast-forward to today. ETFs, which are baskets of securities that you can buy then sell throughout the day, are actually part of the mainstream. And indexing has won the argument. Just one in four actively managed U.S. stock funds has beaten this approach over the past five years, raising doubts about whether you need to sift through lots of funds to produce a diversified and effective portfolio. That’s partly why we overhauled their email list.
Welcome towards the new MONEY 50. And also being more concise, their email list is organized differently. Instead of grouping funds based on the kinds of stocks or bonds they own, the new MONEY 50 categorizes funds based on how you might rely on them.
For instance, do you plan to use them as foundations for that core part of your portfolio? Or will you hold them in small doses, to customize your strategy?
Despite those changes, the objective of their email list remains the same: to help you develop a balanced portfolio that will get you to your most significant financial targets, such as putting your kids through college or achieving a comfortable retirement.
We reconfigured the list into three broad categories, based on how elaborate you want your portfolio to become.
Building-block funds. This category, which contains 14 low-cost index funds and ETFs, is made to help you assemble your core portfolio, which you’re likely to hang on to for years and addressing the bulk of your assets.
Why just index funds? Low-cost indexes provide the purest and cheapest exposure to broad swaths of the markets, which you’ll want for the core. Research has shown that many active managers fall short of their benchmarks because of the higher fees, trading costs, and timing errors associated with frequent trading.
You will be able to construct a well-diversified portfolio with as little as 3 or 4 of the broad-market index funds based in the building-block section.
Custom funds. A well-diversified core portfolio may not be enough to meet all of your needs. You may would rather keep a small stake in actively managed funds, for example, in hopes of earning a bit more return. Or maybe you wish to further diversify your portfolio by utilizing alternative assets, for example real estate or commodities.
This section includes 32 choices that allow you to craft a far more specialized mix. If you’re closing in on retirement and are trying to boost income through dividend-paying stocks, you might choose?SPDR S&P Dividend ETF.
Younger, more aggressive investors might want to use a fund that holds bargain-priced small-cap stocks, for example?Vanguard Small-Cap Value ETF. Due to the added risks, limit your stake during these specialized funds. The majority of your portfolio belongs inside your core.
One-decision funds. Prefer to leave the job to the pros? Then steer clear of the first two categories altogether and opt for the 3rd: all-in-one funds, including two target-date retirement series and 2 balanced funds.
All these portfolios provide you with instant and sufficient diversification. But with target-date funds, the asset mix becomes more conservative as you approach retirement. Balanced funds, by comparison, conserve a constant allocation, typically around 60% to 65% stocks and 35% to 40% bonds. If you’re unlikely or hesitant to monitor and tweak your portfolio over time, your best bet is a target-date fund that meets how old you are.
Making of the MONEY 50
MONEY ignores last year’s hottest funds and instead looks for solid long-term performers with these important traits:
Low fees: Below-average expense ratios make the perfect predictor of better-than-average performance.
Average expenses for actively managed MONEY 50 funds: 0.91%
Average stock fund 1.41%
Long tenure: Good returns don’t mean much if the manager responsible for them is not around.
Average tenure for any MONEY 50 manager: 11.5 years
For fund industry 5.7 years
Strong stewardship: You would like fund managers who put the interests of shareholders ahead of their very own. We use Morningstar stewardship grades for that.
Percent of actively managed MONEY 50 funds graded A or B: 62%
Percent of actively managed stock funds graded that high: 16%
NOTE: For funds that do not receive any stewardship grade from Morningstar. MONEY relies on its own assessment. SOURCE: Morningstar
Building-Block Funds
| Large-Cap | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| SWPPX?Schwab S&P 500 Index Fund… | Blend | 0.10% | -2.60% | +17.83% | $100 |
| SWTSX?Schwab Total Stock Market… | Blend | 0.10% | -2.55% | +18.77% | 100 |
| Mid-Cap/Small-Cap | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| IJH?iShares Core S&P Mid-Cap … | Blend | 0.15% | -2.47% | +23.04% | N.A. |
| IJR?iShares Core S&P Small-Ca… | Blend | 0.17% | -5.00% | +23.64% | N.A. |
| Foreign | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| FSIIX?Fidelity Spartan Internat… | Large Blend | 0.20% | -2.80% | +11.92% | 2,500 |
| VGTSX?Vanguard Total Internatio… | Large Blend | 0.22% | -3.16% | +12.02% | 3,000 |
| VFSVX?Vanguard FTSE All-World e… | Small/Mid Growth | 0.45% | -0.41% | — | 3,000 |
| VEIEX?Vanguard Emerging Markets… | Emerging Markets | 0.33% | -6.15% | +14.06% | 3,000 |
| Specialty | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| VGSIX?Vanguard REIT Index Fund … | Real Estate | 0.24% | +5.12% | +16.74% | 3,000 |
| Bond | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| VBMFX?Vanguard Total Bond Marke… | Intermediate Term | 0.20% | +1.33% | +4.28% | 3,000 |
| VBISX?Vanguard Short-Term Bond … | Short Term | 0.20% | +0.38% | +2.62% | 3,000 |
| VIPSX?Vanguard Inflation-Protec… | Inflation Protected | 0.20% | +2.16% | +5.31% | 3,000 |
| VTIP?Vanguard Short-Term Infla… | Inflation Protected | 0.10% | +0.39% | — | N.A. |
| VTIBX?Vanguard Total Internatio… | World | 0.23% | +1.31% | — | 3,000 |
One-Decision Funds
| Fund | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| PRWCX?T. Rowe Price Capital App… | Balanced | 0.73% | -0.27% | +17.07% | 2,500 |
| VWELX?Vanguard Wellington Fund … | Balanced | 0.25% | -1.21% | +14.58% | 3,000 |
| TRRBX?T. Rowe Price Retirement … | Target Date | 0.69% | -1.08% | +15.61% | 2,500 |
| VTTHX?Vanguard Target Retiremen… | Target Date | 0.18% | -2.00% | +15.33% | 1,000 |
Custom Funds
| Large-Cap | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| PRF?PowerShares FTSE RAFI US … | Value | 0.43% | -3.35% | +23.41% | N.A. |
| SSHFX?Sound Shore Fund | Value | 0.94% | -2.83% | +17.61% | 10,000 |
| PRFDX?T. Rowe Price Equity Inco… | Value | 0.68% | -3.17% | +16.92% | 2,500 |
| POGRX?PRIMECAP Odyssey Growth F… | Growth | 0.67% | +0.89% | +20.93% | 2,000 |
| TRBCX?T. Rowe Price Blue Chip G… | Growth | 0.76% | -0.77% | +23.08% | 2,500 |
| Mid-Cap | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| DEFIX?The Delafield Fund | Value | 1.23% | -5.15% | +22.96% | 1,000 |
| CAAPX?Ariel Appreciation Fund I… | Blend | 1.17% | -4.41% | +25.81% | 1,000 |
| WEHIX?Weitz Series Fund Hickory… | Blend | 1.26% | -3.36% | +23.93% | 2,500 |
| POAGX?PRIMECAP Odyssey Aggressi… | Growth | 0.68% | +1.89% | +27.86% | 2,000 |
| PRDMX?T. Rowe Price Diversified… | Growth | 0.97% | -0.58% | +22.75% | 2,500 |
| Small-Cap | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| RYPNX?Royce Opportunity Fund In… | Value | 1.17% | -3.80% | +27.13% | 2,000 |
| VBR?Vanguard Small Cap Value … | Value | 0.10% | -3.48% | +23.20% | N.A. |
| BERWX?Berwyn Fund | Blend | 1.20% | -4.81% | +21.55% | 3,000 |
| WAAEX?Wasatch Small Cap Growth … | Growth | 1.26% | -1.51% | +25.94% | 2,000 |
| Specialty | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| PID?PowerShares International… | Dividend | 0.56% | -4.18% | +17.47% | N.A. |
| SDY?SPDR S&P Dividend ETF | Dividend | 0.35% | -3.30% | +19.26% | N.A. |
| CSRSX?Cohen & Steers Realty Sha… | Real Estate | 1.00% | +4.95% | +16.37% | 10,000 |
| RWX?SPDR Dow Jones Internatio… | Real Estate | 0.59% | -2.28% | +17.28% | N.A. |
| IGE?iShares United states Na… | Natural Resources | 0.48% | -3.71% | +12.56% | N.A. |
| Foreign | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| DODFX?Dodge & Cox International… | Foreign Large Blend | 0.64% | -2.90% | +18.63% | 2,500 |
| OAKIX?Oakmark International Fun… | Foreign Large Blend | 0.98% | -1.90% | +21.14% | 1,000 |
| VWIGX?Vanguard International Gr… | Foreign Large Growth | 0.48% | -3.98% | +17.11% | 3,000 |
| PRMSX?T. Rowe Price Emerging Ma… | Emerging Markets | 1.27% | -6.92% | +15.33% | 2,500 |
| Bond | Style | Expense Ratio | YTD Return | 5 yr Return | Initial Investment |
|---|---|---|---|---|---|
| DODIX?Dodge & Cox Income Fund | Intermediate Term | 0.43% | +1.48% | +7.28% | 2,500 |
| HABDX?Harbor Bond Fund Institut… | Intermediate Term | 0.57% | +1.67% | +6.88% | 1,000 |
| VFSTX?Vanguard Short-Term Inves… | Short Term | 0.20% | +0.37% | +4.94% | 3,000 |
| LSBRX?Loomis Sayles Bond Fund R… | Multisector | 0.92% | +0.46% | +13.86% | 2,500 |
| SPHIX?Fidelity Huge salary Fund… | High Yield | 0.72% | +0.11% | +16.90% | 2,500 |
| VWITX?Vanguard Intermediate-Ter… | Muni Natl Intermediate | 0.20% | +1.46% | +4.71% | 3,000 |
| VMLTX?Vanguard Limited-Term Tax… | Muni Natl Short | 0.20% | +0.45% | +2.38% | 3,000 |
| TPINX?Templeton Global Bond Fun… | World | 0.89% | -2.05% | +9.13% | 1,000 |
| FNMIX?Fidelity New Markets Inco… | Emerging Markets | 0.87% | -1.03% | +14.22% | 2,500 |
| Notes: Five-year returns are annualized. Templeton Global Bond fund has a 4.25% sales load. While Money Magazine recommends all target retirement funds within the T. Rowe Price and Vanguard fund families, data listed are for T. Rowe Price Retirement 2020 and Vanguard Target Retirement 2035.Sources: Morningstar and fund companies (Sources for original listing in January/February 2019 issue of Money Magazine: Lipper and fund companies) | |||||