8/24/2011 3:10 PM ET|
The top time-tested mutual funds
Want to get the most for your nest egg? These funds are the best performers by category over the past one-, three-, five-, 10- and 20-year stretches.
Here are top mutual fund performers over the past one, three, five, 10 and 20 years, in 11 categories -- 10 stock-fund groups and one group for alternative investments -- along with a few suggestions on funds you should consider buying.
The lists consist of funds that require only modest initial investments and are available to all classes of customers.
Large-company stock funds
Growth funds dominate the list of leaders over the past 12 months, which is not surprising given how slowly the economy is growing.
Over longer periods, a few value-conscious managers, such as Donald Yacktman, stand out. With his son Stephen, Yacktman runs two eponymous top performers: Yacktman (YACKX) and Yacktman Focused (YAFFX).
Many of the category's top funds, including Yacktman's, hold relatively few stocks or make big sector bets. Of course, a focused strategy can backfire, as it has in 2011 for Fairholme (FAIRX), which is heavily invested in financial stocks.
Fidelity Contrafund (FCNTX) is a growth-oriented fund that's been deftly run by Will Danoff since 1990. Two funds that adhere to Islamic investing principles -- Amana Trust Growth (AMAGX) and Amana Trust Income (AMANX) -- benefited during the financial crisis by shunning ownership of companies that lend money.
- Large-company funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
Midsize-company stock funds
Midsize companies are in the market's sweet spot. They are small enough to be able to grow swiftly, yet they are less risky than small-company stocks.
The longer-term winners in this category have excelled in a variety of market climates.
Rick Aster, who has run the Meridian Growth (MERDX) fund since 1984, sniffs out fast-growing, high-quality companies and hangs on to them. Appleseed (APPLX) is a socially screened fund with a value bent and a sizable gold stake among its 20 holdings.
This category also includes funds, such as Fidelity Low-Priced Stock (FLPSX), that invest in companies of all sizes. This fund typically buys stocks priced at $35 a share or less. Joel Tillinghast, who has run it since its 1989 launch, holds nearly 900 stocks.
- Midsize-company funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
Small-company stock funds
This has been the strongest part of the U.S. market over the past year. Small-company stocks, particularly those of fast-growing companies, have been on a tear since the bear market ended in March 2009. The Russell 2000 Growth index was up 34% in 2009, 29% last year and 8.6% in the first half of 2011.
That not one of the top one-year performers appears on the list of three-year winners underscores the risk of investing in this volatile category of funds.
Intrepid Small Cap (ICMAX), which seeks value stocks, has been a consistent performer, but it recently had a change of managers. The T. Rowe Price Equity Income (PRFDX)and Baron Small Cap (BSCFX) funds have stellar long-term records -- each has returned an average of 8.4% a year over the past decade.
- Small-company funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
This hodgepodge category includes convertible-bond funds, balanced funds and others whose common denominator is that they are not fully invested in common stocks.
Among traditional balanced funds -- those that have about two-thirds of their assets in stocks and the rest in fixed-income securities -- two standout value-oriented choices are Dodge & Cox Stock (DODGX) and Oakmark Equity and Income (OAKBX).
The Vanguard Wellesley Income (VWINX) fund is the mirror image of typical balanced funds; it allocates two-thirds of its portfolio to bonds, and the rest is in stocks. The Permanent Portfolio (PRPFX) fund invests in, among other things, stocks, Treasurys, Swiss francs and gold.
- Hybrid funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods on Kiplinger.com
International diversified large-company funds
A sagging dollar has aided recent returns of funds in this category, although there have been plenty of land mines for managers to navigate, including the sovereign debt crisis that continues to roil Europe and the threat of inflation that prompted some emerging economies, including China and Brazil, to take measures to blunt economic growth.
The value-oriented Dodge & Cox International Stock (DODFX) fund and the growth-oriented Harbor International (HIINX) fund have been solid long-term performers. Harbor hasn't faltered since the death last year of its founding manager, Hakan Castegren.
Another well-run value fund worth noting is Oakmark International (OAKIX), run by David Herro since 1992.
- International diversified large-company funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
Small- and midsize-company international funds
Investors were rewarded for taking risks over the past year, and this was as true in overseas markets as it was on the home front. While the winners in this group soared, they generally charged high annual fees. Over longer stretches, it pays to pay attention to expenses.
A favorite in this category is the T. Rowe Price International Discovery (PRIDX) fund, the granddaddy of small-company overseas funds. The 20-year figure is meaningless, given that Discovery is the only fund in this group with a record that long. But being a 10-year winner speaks to the fund's consistency. The fund has been in the top half of its category in six of the past nine years, as well as in the first half of 2011.
The value-oriented Oakmark International Small Cap (OAKEX) fund beat its peers by an average of 23 percentage points in 2009.
- Small- and midsize-company international funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
Global stock funds
Funds in this category can invest anywhere.
Morningstar puts the little-known Encompass (ENCPX) fund in this group. But Encompass also resembles a sector fund about 75% of its assets are in small and micro-cap companies in the energy and precious metals sectors, and 14% of assets are in U.S. stocks. Encompass plunged 62% in 2008, soared 137% in 2009 and gained 60% last year. Since it can go into any sector, if its managers identify the next big thing, we'll know they weren't just lucky.
Among the category's more sedate offerings is the Oakmark Global (OAKGX) fund. An intriguing fund is Old Westbury Global Small and Mid Cap (OWSMX), which is sponsored by old-money institutional manager Bessemer Trust. The fund uses Dimensional Fund Advisors as one of its four managers, so you can tap DFA's expertise without hiring a DFA-approved adviser.
- Global stock funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
Diversified emerging-markets funds
After a torrid stretch, investments in places like India and Brazil have cooled off a bit. The MSCI Emerging Markets index soared 79% in 2009 and gained 19% last year, though it earned a mere 1% in the first half of 2011.
Emerging-market stocks are about 50% more volatile than U.S. stocks, so tread cautiously here. Speaking of volatility, take a Dramamine before buying the Wasatch Small Cap Growth (WAAEX) fund, which invests in fast-growing companies. It soared 118% in 2009 and 41% last year but plunged 57% in 2008, its first full year.
If you can buy the Oppenheimer Developing Markets (ODMAX) fund without paying a load, go for it; it has been a relatively steady performer and has a fine long-term record. Another favorite in this category is the T. Rowe Price Emerging Markets Stock (PRMSX) fund, which barely missed making the winners list over five and 10 years.
- Diversified emerging-markets funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
Regional and single-country funds
This category could be a good place to look if you want to add spice to your portfolio.
One-year figures say Europe is on the march, but short-term results can mislead. Looking ahead, you're almost sure to earn more in faster-growing regions, namely Asia and, to a lesser degree, Latin America.
Another option is the 5-year-old Royce European Small Companies (RISCX) fund -- the Royce fund family has a long and distinguished record of investing in small, undervalued companies in the United States.
The Matthews funds, including Matthews Pacific Tiger (MAPTX) and Matthews Asia Dividend Investor (MAPIX), are run by veteran managers who live in the Asia-Pacific region and focus on regional investments, making these funds less risky than single-country funds.
If you want to bet on one country, consider the Fidelity Canada (FICDX) fund. Canada is no longer being overlooked by investors, who are drawn north by abundant natural resources and a strong currency. In addition, Canada's banks are in decent shape.
- Regional and single-country funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
The category has been a mixed bag for investors over the past year, with energy and natural resources funds providing the most consistent returns.
Funds that invest in a single industry or segment of the economy carry above-average risk and are meant to be used for side bets rather than as the core of a portfolio. You can make a long-term case, though, for owning a fund that invests in the beneficiaries of rising oil prices.
One fine choice is the Vanguard Energy (VGENX) fund, which focuses on large energy companies.
Health care is another sector worth holding for the long run, and the Vanguard Health Care (VGHCX) fund is a strong entry. Manager Edward Owens has been on the job since 1984.
After performing brilliantly for a decade, gold funds cooled off in the first half of 2011. Gold is a good hedge against a weakening dollar. If you believe that trend will continue, you might consider Tocqueville Gold (TGLDX), a fund invested in mining companies of all sizes, most of which are headquartered in Canada but explore and develop mineral deposits around the globe.
- Sector funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
This category consists of funds that invest in assets other than stocks or bonds. Used judiciously, these funds can boost your portfolio's returns and help smooth out its ups and downs.
Among notable funds in the category are Harbor Commodity Real Return (HACMX) and Merger Fund (MERFX). The Harbor fund, as well as a nearly identical Pimco fund, use derivatives to track a commodity index. Pimco managers, who run both funds, seek to bolster returns by actively managing the bonds that back the derivatives. Merger invests in takeover targets after a deal is announced in hopes of capturing the final bit of appreciation before the deal is finalized.
Another nontraditional fund worth considering is Wasatch Long/Short Fund (FMLSX), which, as its name implies, owns stocks that it thinks will rise in value while selling other shares short, betting they will fall in value.
- Alternative funds: See the 10 top performers over the past one-, three-, five-, 10- and 20-year periods at Kiplinger
This article was reported by the editors of Kiplinger's Personal Finance magazine.
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