Investors may dream of building a first-rate mutual fund portfolio in their journey to financial freedom. However, the question of what mutual funds are best to invest in often stops them in their tracks. In the US alone, there are close to 8,000 funds with investment potential.
So, we are here to walk investors through some top-performing mutual funds with which to diversify their portfolios. The list below is a compilation of Forbes Advisor. The compilation involved rummaging through the profiles of 10,000 funds. The performance of the funds was assessed over the space of three, five, and ten years. Also, for first-timers to mutual funds, funds that require an initial investment exceeding $3,000 were struck out.
The data for this compilation was sourced from Morningstar Direct in September 2024. Below is a list of the top ten mutual funds according to Forbes Advisor:
- Shelton Nasdaq-100 Index Investor Fund (NASDX)
- Fidelity US Sustainability Index Fund (FITLX)
- Schwab S&P 500 Index Fund (SWPPX)
- Schwab Fundamental US Large Company Index Fund (SFLNX)
- T. Rowe Price Mid-Cap Growth Fund (RPMGX)
- Schwab Fundamental US Small Company Index Fund (SFSNX)
- Fidelity International Index Fund (FSPSX)
- Dodge & Cox Income (DODIX)
- Vanguard Long-Term Investment-Grade Investor Shares (VWESX)
- Fidelity Intermediate Municipal Income Fund (FLTMX)
The mutual funds listed above have some common denominators that qualify them for the top ten positions. However, the list involves ranking the top ten funds according to their 10-year average annual return. Over the past ten years, the average yearly return of NASDX and FITLX was 17.09% and 14.77%, respectively. That of SWPPX, SFLNX, RPMGX, and SFSNX was 12.70%, 11.29%, 10.43%, and 8.43%, respectively.
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What Is a Mutual Fund?
A mutual fund is an easy route to investment diversification through a single fund portfolio. Think of it as a pool of investments by multiple investors, from which the fund buys a portfolio of bonds, stocks, and similar securities. The contributing investors share the proceeds and risks of the investments commensurately.
What are the Types of Mutual Funds
Depending on the type of investments they focus on, mutual funds can be grouped into five categories:
- Target date funds: This is a fund type for retirement investors. They have a target, and the fund adjusts the risk profile of investments with the closeness of the retirement date in mind.
- Money market mutual funds: These funds have meager returns but are rock solid. Investors who aim to preserve the value of their wealth and protect it from inflation often put their money here.
- Balanced funds: This type of fund often invests in a mix of bonds and stocks.
- Bond mutual funds, also called fixed-income funds, often invest in corporate bonds, municipal bonds, and treasury bonds. Investors in this fund type seek assurance of returns and investment security.
- Stock mutual funds: This type of fund invests in publicly traded company shares. Holders of this fund type are not particular about getting bulky dividends but often hunt for stocks with high potential value yield.
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What Are the Best Mutual Funds to Invest in 2024?
Before investing in mutual funds, investors must assess their financial goals. Subsequently, they can match their expectations with the performance of the best mutual funds on the market. There are several factors to consider when picking the best mutual funds on the market.
So, here’s how to know the best mutual funds to invest in now. The most important factors to consider when making a pick of best-performing mutual funds are:
- Net Asset Value (NAV): This is the value of one unit of the fund per share. Mutual funds with high NAVs are hard to come by and are usually expensive to invest in. However, they often make steady and tangible returns.
- Minimum Investment: Some mutual funds allow investors to start with whatever amount they have. However, most require a minimum investment of a few hundred to a few thousand dollars.
- Assets Under Management (AUM): This represents the total asset portfolio of the fund in question. The higher the AUM of a fund, the stronger their financial situation. However, it may also mean there are more investors involved, thus making it less flexible with investment decisions.
- Fund Performance: This is the fund’s performance history over time. Fund managers often assess a fund’s performance over the last three to ten years.
- Management Style: Mutual funds are either managed passively (index funds) or actively (by a portfolio manager). Active funds often come with higher fees, so newbies to mutual funds may want to choose index variants.
- Fees: The SEC requires mutual funds to include all predictable fees in their prospectus. Thus, accompanying fees may cause investors to rethink their choice of the mutual fund, irrespective of its market performance.
Eventually, there’s no one-size-fits-all response to the question, “What mutual funds are best to invest in?” It depends on individual investment latency and long- or short-term investment goals. It is estimated that half of all American households invest in some form of mutual fund. At the very least, what mutual funds are best to invest in is no longer a limiting factor.
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