Many investors focus on total returns when comparing one fund against another. While it’s good to know how much your money can grow, the size of the fund can also impact your total returns.
Each fund incurs operating costs that factor into the expense ratio. This ratio reflects the annual cost of investing in the fund. For instance, if a mutual fund has a 1% expense ratio, you will have to pay $10 for every $1,000 you put into the fund.
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The expense ratio is a silent cost that gets deducted from the fund’s share value. Investors can end up with lower expense ratios by investing in mutual funds with higher assets under management, or AUM. This is simply because higher AUM can result in operating costs getting spread among more investors and assets.
One way you can save money and possibly increase your returns is by focusing on the largest mutual funds. However, a few of the largest funds have relatively large expense ratios as well when compared with some of the low-cost index funds out there, and especially low-cost exchange-traded funds, or ETFs.
Many of the largest mutual funds use popular indexes like the S&P 500 as benchmarks and with the goal of generating competitive market returns.
This list of the largest mutual funds is based on Fidelity’s Mutual Fund Research screener, which lists mutual funds from the highest net assets to the lowest. These are the 10 largest mutual funds by portfolio assets as of Aug. 31:
| Mutual Fund | Assets | Expense ratio |
| Vanguard Total Stock Market Index Fund Admiral Sales (ticker: VTSAX) | $1.7 trillion | 0.04% |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | $1.2 trillion | 0.04% |
| Fidelity 500 Index Fund (FXAIX) | $568.3 billion | 0.015% |
| Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) | $441.1 billion | 0.12% |
| Fidelity Government Money Market Fund (SPAXX) | $333.4 billion | 0.42% |
| Fidelity Government Money Market Fund Premium Class (FZCXX) | $333.4 billion | 0.32% |
| Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) | $329.6 billion | 0.05% |
| Vanguard Institutional Index Fund (VINIX) | $300.1 billion | 0.035% |
| American Funds The Growth Fund of America Class A (AGTHX) | $279.7 billion | 0.63% |
| American Funds The Growth Fund of America Class C (GFACX) | $279.7 billion | 1.39% |
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Assets: $1.7 trillion
VTSAX gives investors exposure to about 3,700 stocks with an emphasis on technology. The fund has a $3,000 investment minimum and uses the CRSP U.S. Total Market Index as a benchmark. Its trailing-12-month yield is 1.3%.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Assets: $1.2 trillion
This large blend fund has a $3,000 minimum investment requirement and is also available as an ETF. The fund uses the S&P 500 as its benchmark and puts most of its assets into the information technology sector. It has a trailing-12-month yield of 1.3%.
Fidelity 500 Index Fund (FXAIX)
Assets: $568.3 billion
Just like VFIAX, this large-blend fund seeks to mimic the returns of the S&P 500. The fund’s top holdings primarily consist of technology companies. FXAIX has been around since 1988, and it has a 10-year annualized return of 13%. The fund is up 19.5% year to date. Its trailing-12-month yield is 1.2%.
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
Assets: $441.1 billion
This fund uses the FTSE Global All Cap ex U.S. Index as its benchmark. The fund requires a $3,000 minimum investment and gives investors exposure to more than 8,600 stocks. It has a decent trailing yield of 2.9% to add to the attraction, and it has a 17.1% return for the past year.
Fidelity Government Money Market Fund (SPAXX)
Assets: $333.4 billion
The Fidelity Government Money Market Fund is a low-risk fund that gives investors exposure to short-term U.S. debt. A money market fund is a mutual fund that generally aims for short-term, higher-quality investments. High liquidity with low risk is one of this fund’s goals by design.
Elevated interest rates have helped the fund generate higher returns for investors this year, but annual returns are still in the low single digits. Its seven-day SEC yield is 5% and it has no minimum investment requirement, but it has a 0.42% expense ratio to consider.
Fidelity Government Money Market Fund Premium Class (FZCXX)
Assets: $333.4 billion
This fund is essentially the same as SPAXX. The difference is that FZCXX has a minimum investment of $100,000 and a lower expense ratio of 0.32%. That means a higher yield of 5.1%, but the super-high minimum might be a deterrent for some investors.
[See: 7 of the Best Ways to Invest $5,000]
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
Assets: $329.6 billion
Vanguard Total Bond Market Index Fund Admiral Shares has a $3,000 initial investment requirement and tracks the Bloomberg U.S. Aggregate Float Adjusted Index. This fund offers exposure to U.S. Treasurys and mortgage-backed securities. It has an attractive trailing-12-month yield of 3.4%.
Vanguard Institutional Index Fund (VINIX)
Assets: $300.1 billion
VINIX is a large blend mutual fund that has a low 0.035% expense ratio. With 503 holdings, the passively managed fund aims to mirror the S&P 500’s performance. While many funds use the S&P as a benchmark, VINIX requires a minimum investment of $5 million, hence the “institutional” in its name. It’s a popular choice in 401(k) plans, however, so even if you don’t have multi-millions to invest you may be able to access it through your employer’s retirement plan options.
American Funds The Growth Fund of America Class A (AGTHX)
Assets: $279.7 billion
AGTHX is a fund that caters to growth investors. U.S. equities make up over 90% of the fund’s total assets. Most of the stocks in the fund are large-cap growth stocks, with Microsoft Corp. (MSFT) and Meta Platforms Inc. (META) as top holdings. The minimum investment is $250, and the fund has an expense ratio of 0.63%. AGTHX has a 15-year annualized return of 13.7% and a 30.3% return over the past year, due to its tech-heavy bent.
American Funds The Growth Fund of America Class C (GFACX)
Assets: $279.7 billion
This fund gives investors exposure to the same assets as the Class A shares in AGTHX. The minimum investment is $250, and the fund currently holds 323 stocks. Its expense ratio is higher than the Class A version, at 1.39%. Its 15-year and one-year returns are slightly lower.
What to Look For in a Mutual Fund
Mutual funds with many assets under management tend to have lower expense ratios because they can spread the costs among more capital. Most mutual funds won’t raise their expense ratios by 50% if shares also go up by 50%.
While assets under management can tip an investor off about the expense ratio and if it will stay low, there are other details to consider. Investors should look at a fund’s historical returns and asset allocation.
Historical returns aren’t a reliable indicator of future results. However, steady gains over the long run can be promising for investors who initiate positions in the mutual fund.
Asset allocation indicates what you get with your current money. Investors can decide how much exposure they want to tech companies, large-cap stocks and other opportunities. Some mutual funds will line up with the asset allocation they desire based on their risk tolerance.
If a mutual fund tracks a popular index like the S&P 500, an investor should compare the fund’s performance with the benchmark. The returns should be similar. Mutual funds may have a slight gap compared to the benchmark due to the expense ratio. Still, some mutual funds manage to outperform the benchmark.
Mutual Funds vs. ETFs
Mutual funds and ETFs both give investors exposure to many stocks. Funds have established goals and asset allocations that investors can view before buying shares.
Some of the mutual funds included on this list are also available as ETFs. Expense ratios and asset allocations are similar, but the key difference is trading during market hours.
Mutual funds cannot be traded throughout the day. You can execute a buy or sell order that will get placed at the end of the day. Mutual fund prices only change once per day, when the market closes.
On the other hand, ETFs trade throughout the day and have price fluctuations just like any individual stock. It is also possible to trade options that follow an ETF. Investors can also use limit orders, stop-losses and other types of orders for ETFs.
Since mutual funds do not offer the same level of trading flexibility as ETFs, they are more suited for passive investors. You can still invest in ETFs and be a passive investor, but ETF investors have more opportunities to trade throughout the day if they wish.
Should You Invest in a Mutual Fund?
Mutual funds give investors broad exposure to the stock market and allow them to track various indexes. These funds offer instant portfolio diversification and asset management, which can save investors a lot of time.
Investors can put their money into actively managed mutual funds and let the portfolio managers do all of the work. You can also put your money into a passively managed mutual fund to save more money on fees. Some investors buy individual stocks along with mutual funds, or choose a fund with larger positions in their favorite stocks.
The main downside with mutual funds is the expenses. Some mutual funds can get expensive, with front and back loads impacting total returns. Luckily, it’s easy to find mutual funds with no loads and very low expense ratios. Investment firm Vanguard is a good place to start your search for low-cost mutual funds.
Investors have to weigh whether an expense ratio justifies having someone else handle the investing for them to achieve market returns. For many investors, a small expense ratio for a fund with significant AUM and solid historical returns is worth the time saved.
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10 Largest Mutual Funds by AUM originally appeared on usnews.com
Update 09/03/24: This story was published at an earlier date and has been updated with new information.
