In the age of exchange-traded funds, or ETFs, many investors think that mutual funds are the kind of old-timey investments that were good for our grandfathers but useless to us in the 21st century. They say mutual funds are overpriced, harder to trade and just plain inefficient.
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While there certainly are some funds that fit that mold, this negative generalization of all mutual funds is mostly untrue. In fact, there are a lot of mutual funds that now offer no minimum investments or have fees as low as popular exchange-traded alternatives. What’s more, there are still some investors who prefer the peace of mind or tactical potential of active management, even if passive index funds are all the rage.
The following list offers the best mutual funds to buy now based on nine distinct strategies. Some are cheap index alternatives and others are active mutual funds that chase outperformance. But all are good examples of how mutual funds are not the boring and outdated instruments some think they are.
| Mutual Fund | Strategy | Expense ratio |
| Fidelity 500 Index Fund (ticker: FXAIX) | Large-cap stocks | 0.015% |
| T. Rowe Price Mid-Cap Growth Fund (RPMGX) | Mid-cap stocks | 0.77% |
| Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) | Small-cap stocks | 0.05% |
| T. Rowe Price Science and Technology Fund (PRSCX) | Sector focused | 0.84% |
| Parnassus Core Equity Fund (PRBLX) | ESG investing | 0.82% |
| Vanguard Total Stock Market Index Fund (VTSAX) | Blended domestic stocks | 0.04% |
| Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) | Blended foreign stocks | 0.11% |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | Investment-grade domestic bonds | 0.05% |
| PIMCO Total Return Fund (PTTAX) | Unconstrained bonds | 0.80% |
Fidelity 500 Index Fund (FXAIX)
— Assets under management: $414 billion
— Strategy: Large-cap stocks
— Fee structure: 0.015%, or $1.50 annually for every $10,000 invested
— Minimum investment: None
If you think mutual funds can’t compete with the cost structure of ETFs, this Fidelity offering should put that idea to bed. As the name implies, this is a low-cost index fund benchmarked to the S&P 500 index of 500 leading U.S. corporations. And since managing index funds like this one is pretty straightforward — sticking with familiar blue-chip stocks like Apple Inc. (AAPL), Johnson & Johnson (JNJ) and JPMorgan Chase & Co. (JPM) — Fidelity has chosen to undercut similar funds with a cost structure even lower than the already rock-bottom rates charged by the competition. If you want exposure to large U.S. companies, this cheap mutual fund could be a good core holding.
T. Rowe Price Mid-Cap Growth Fund (RPMGX)
— Assets under management: $28 billion
— Strategy: Mid-cap stocks
— Fee structure: 0.77%
— Minimum investment: $2,500
If you want to go a bit smaller, this well-established T. Rowe Price fund is focused on mid-size corporations as defined by the S&P Midcap 400 and Russell Midcap Growth indexes — so not the Silicon Valley behemoths you normally see covered in the news, but companies like medical technology firm Hologic Inc. (HOLX) or industrial company Ingersoll-Rand Inc. (IR). Generally, there’s more risk in stocks like these, as they aren’t as well heeled, but it’s often easier for a $2 billion company to double in size than a $1 trillion company to do so. If you want to supplement your large holdings to get a bit more growth potential, RPMGX is a good option for growth-oriented companies that are a tad smaller than the usual suspects.
Vanguard Small-Cap Index Fund Admiral Shares (VSMAX)
— Assets under management: $46 billion
— Strategy: Small-cap stocks
— Fee structure: 0.05%
— Minimum investment: $3,000
Going even smaller, the holdings in this Vanguard fund have an average market capitalization of about $5 billion. Also small is its fee structure, with an incredibly affordable fee of 0.05% in annual expenses. The portfolio itself is quite substantial, however, with roughly 1,500 different stocks. Industrials make up the biggest share at 20% or so, followed by small-cap tech stocks at 16%. There’s more risk with smaller companies, but there is also a chance for even greater upside potential — as well as faster response to a “cyclical” recovery because these companies can staff up and grow faster than larger corporations.
T. Rowe Price Science and Technology Fund (PRSCX)
— Assets under management: $7 billion
— Strategy: Sector focused
— Fee structure: 0.84%
— Minimum investment: $2,500
A bit on the pricier side, this sector-specific T. Rowe mutual fund offers a tactical approach that some mutual fund investors may be drawn to. There’s a focused portfolio of just 60 stocks or so, led by behemoths Microsoft Corp. (MSFT) and Google parent Alphabet Inc. (GOOG). But this is not your typical tech index fund, with unique positions like mid-size German e-commerce firm Zalando SE (OTC: ZLNDY). This is a good example of the kind of active approach some mutual funds offer that ETF index funds do not. With gains of about 36% year to date, PRSCX’s managers seem to have delivered in 2023.
Parnassus Core Equity Fund (PRBLX)
— Assets under management: $25 billion
— Strategy: ESG investing
— Fee structure: 0.82%
— Minimum investment: $2,000
Though you may not know it from its name, the Parnassus Core Equity Fund is built with an eye on ESG criteria, or investments that score well on environmental, social and corporate governance metrics. For investors who don’t want to own firms that are all run by men or pollute more than their peers, this is one of the best mutual funds focusing on ESG values. It’s a core holding, however, so it’s not designed to only own solar companies or EV manufacturers. PRBLX has a focused portfolio of just 40 total stocks, led by Microsoft and Alphabet.
[READ: 7 Ways to Invest in the Energy Storage Boom.]
Vanguard Total Stock Market Index Fund (VTSAX)
— Assets under management: $305 billion
— Strategy: Blended domestic stocks
— Fee structure: 0.04%
— Minimum investment: $3,000
Most investors simply don’t want the guesswork of managing a portfolio of some (or all) of the previous funds, which might mean rebalancing positions according to their personal goals. In that case, the Vanguard Total Stock Market mutual fund is exactly what it sounds like: a simple, one-stop option for exposure to the entire U.S. stock market. There are nearly 4,000 stocks in this mutual fund, representing all sectors of the domestic marketplace and all sizes of companies. Keep in mind that the portfolio is not evenly divided across those firms, however, and is instead weighted by size. That means the familiar blue chips on Wall Street will anchor your portfolio, even as you get exposure to stocks of all shapes and sizes when you move deeper into the list of holdings.
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
— Assets under management: $67 billion
— Strategy: Blended foreign stocks
— Fee structure: 0.11%
— Minimum investment: $3,000
Of course, the one thing you’re missing from the prior fund is a global footprint. If you’re looking for a bit of geographic diversification as well, this Vanguard investment is an “ex-U.S.” fund that excludes U.S. firms and only owns international stocks. This makes it an easy addition to any portfolio that will avoid duplicating stocks you may already own in other domestic-focused funds. It’s also worth noting that while VTIAX is global, its roughly 8,000 stocks have a lot of familiar multinational names such as Asian chipmaker Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) and Swiss consumer products giant Nestlé SA (OTC: NSRGY). Furthermore, the bulk of assets are in developed markets, with Japan in the lead at 16% of assets followed by the U.K. at 9%, so don’t fear that aggressive emerging market picks will overpower this mutual fund.
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
— Assets under management: $94 billion
— Strategy: Investment-grade domestic bonds
— Fee structure: 0.05%
— Minimum investment: $3,000
We’ve covered stocks, but the bond market is another crucial part of any well-rounded portfolio — particularly in this era of rising interest rates. The Vanguard Total Bond Market mutual fund is among the most popular mutual funds out there, with a massive amount of assets under management and an enormous portfolio of more than 10,000 “investment-grade” bonds. That means debt securities of high credit quality from corporations like Bank of America Corp. (BAC) or government entities like the U.S. Treasury. Right now, the yield is about 5% — more than three times what you’ll typically find in the stock market. You won’t see your principal grow as fast, and bonds do carry their own risks, but this one-stop fund is a good option if you want to diversify bond stocks into the asset class of bonds.
PIMCO Total Return Fund (PTTAX)
— Assets under management: $52 billion
— Strategy: Unconstrained bonds
— Fee structure: 0.80%
— Minimum investment: $1,000
An icon of fixed-income investing, this actively managed bond fund from PIMCO has been in operation since 1987. The fund has a long history of outperformance that includes an average return of more than 6% annually — which may not sound like a ton, but considering the recent extended period of near-zero interest rates, it goes to show just how shrewd the managers at PTTAX are. Total return is “unconstrained,” meaning it invests in anything and everything across the bond market including tactical buys in “junk” bonds, emerging market debt and other high-risk, high-reward assets. It has a strong foundation of corporate debt and Treasurys to even that out, however, adding up to a unique fund that delivers a roughly 5% yield. In a changing interest rate environment, the more hands-on approach of PTTAX may appeal to some investors — but keep in mind the elevated fees that come alongside this strategy.
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9 Best Mutual Funds to Buy Now originally appeared on usnews.com
Update 10/25/23: This story was previously published at an earlier date and has been updated with new information.
