With the rise of exchange-traded funds, or ETFs, that let you buy and sell throughout the trading day, mutual funds have fallen out of the limelight. But don’t write the old stalwart of simple, diversified investing off just yet.
The following list of the best mutual funds to buy now may prove to skeptics that older investment vehicles still have an important role to play. That’s true whether you’re looking for a tactical way to invest or just seeking a simple index fund with a cost-effective fee structure.
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Each fund listed below has earned a gold badge rating from Morningstar. This indicates that the analysts have the most conviction the fund will outperform a relevant index or most of its peers over a market cycle.
| Mutual Fund | Assets Under Management | Expense Ratio | Minimum Investment |
| Vanguard Wellington Fund (ticker: VWELX) | $111.7 billion | 0.26% | $3,000 |
| Vanguard Total Stock Market Index Fund (VTSAX) | $1.6 trillion | 0.04% | $3,000 |
| Fidelity 500 Index (FXAIX) | $512.4 billion | 0.015% | $0 |
| Fidelity ZERO International Index (FZILX) | $4 billion | 0% | $0 |
| American Funds Bond Fund of America (ABNDX) | $82.6 billion | 0.62% | $250 |
Vanguard Wellington Fund (VWELX)
AUM: $111.7 billion Expense ratio: 0.26% Minimum investment: $3,000
As one of the oldest mutual funds, the Vanguard Wellington Fund is the natural place to begin. Founded in 1929, VWELX is also the first balanced fund. This means it was the first fund to combine both stocks and bonds within its portfolio.
The fund invests about two-thirds of its portfolio in stocks and one-third in bonds. It also aims to provide investors exposure to all economic sectors. In the words of Vanguard, “This is important because one or two holdings should not have a sizeable impact on the fund.”
VWELX does a decent job of diversifying its portfolio across its 74 stocks and 1,327 bonds. The largest holding, Microsoft Corp. (MSFT), only accounts for 5.6% of the total portfolio. You also get exposure to all 11 sectors, as promised. The bulk of the equity portfolio is in information technology at just over 26% of the portfolio compared to only 1.2% in the real estate sector.
Vanguard Total Stock Market Index Fund (VTSAX)
AUM: $1.6 trillion Expense ratio: 0.04% Minimum investment: $3,000
The Vanguard Total Stock Market mutual fund is one of the largest mutual funds on Wall Street. It’s also deceptively simple, doing exactly what it sounds like it should by offering exposure to the totality of the U.S. stock market.
There are nearly 4,000 different stocks that make up this product, representing all sectors of the domestic marketplace and all sizes of companies. Of course, not all those investments are represented equally, with more than 32% of total assets in the tech sector. The fund is also weighted toward larger companies, so trillion-dollar tech giants Microsoft and Apple Inc. (AAPL) make up more of the fund’s portfolio than smaller startups. But if you want a bit of all that Wall Street has to offer, this mammoth mutual fund is a great place to start — particularly considering its rock-bottom fees that undercut even some of the cheapest ETFs out there.
[READ: 7 Best Large-Cap ETFs to Buy in 2024]
Fidelity 500 Index (FXAIX)
AUM: $512.4 billion Expense ratio: 0.015% Minimum investment: $0
Another mutual fund that proves ETFs aren’t necessarily the lowest-cost option is FXAIX. With a 0.015% expense ratio, this one is hard to beat. It’s also hard to resist with a $0 investment minimum.
FXAIX is Fidelity’s answer to an S&P 500 mutual fund. It invests at least 80% of its assets in the S&P 500 index. This means you’ll get exposure to the largest names on Wall Street, including Microsoft Corp., Apple Inc. and Nvidia Corp. (NVDA). You’ll also be getting a lot of tech exposure with nearly 30% of the portfolio in these types of companies.
FXAIX has stayed true to its benchmark by providing virtually identical returns to the S&P 500 over the past 10 years. Morningstar’s analysts not only give it a gold badge, but also five out of five stars. So next time you find yourself eyeing an S&P 500 ETF, make sure to give FXAIX due consideration too.
Fidelity ZERO International Index (FZILX)
AUM: $4 billion Expense ratio: 0% Minimum investment: $0
It’s time to stop dancing around the truth and come right out and say it: You can get a mutual fund for zero fees. Fidelity Investments launched four zero-minimum, zero-expense-ratio mutual funds in 2018. This includes a total market index (FZROX), a large-cap index (FNILX), an extended market index (FZIPX) and an international index (FZILX).
All four of these funds are worth considering and have gold badges from Morningstar. We’re highlighting FZILX here simply to show even international stock exposure can come cheap. While it may appear small compared to the other funds on this list in terms of assets under management, remember that it’s only five years old.
FZILX invests predominantly in companies outside of the U.S., making it a great addition to a U.S.-heavy portfolio. Only 0.31% of the portfolio is American-made at the moment. Most of its assets are in European companies at just over 42%. This is followed by roughly one-quarter of the portfolio in emerging markets and about 17% in Japan.
With nearly 2,300 companies in all, you can trust you’re well-diversified. The largest holding, Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), accounts for only 2% of total assets. Only 13% of all assets are in the top 10 holdings.
American Funds Bond Fund of America (ABNDX)
AUM: $82.6 billion Expense ratio: 0.62% Minimum investment: $250
Before it starts to appear Vanguard and Fidelity are the only names in town, it’s time to give the American Funds Bond Fund of America due recognition. It has also earned a gold badge and four stars from Morningstar. So if you’re looking for some fixed-income exposure to balance out your stock portfolio, this could be the one for you.
ABNDX is designed to be a core intermediate bond holding. It focuses on high-quality, investment-grade U.S. bonds across all sectors. The largest issuer currently is the U.S. Treasury, followed by Fannie Mae. The portfolio is also nearly 40% mortgage-backed obligations and 30% corporate issues. Most exciting of all may be the 5% average yield to worst, which is the lowest return investors can expect from the current portfolio.
At 0.62%, this fund is a bit more expensive than others on the list, but fixed-income exposure tends to be more costly. ABNDX is still considered low cost relative to its peers, which average a 0.76% expense ratio, according to Morningstar.
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5 Best Mutual Funds to Buy Now originally appeared on usnews.com
Update 05/10/24: This story was previously published at an earlier date and has been updated with new information.
