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 off the old stalwart of simple, diversified investing just yet.
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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. Each of the following funds has earned five out of five stars and a gold badge from Morningstar analysts, indicating they have the highest conviction that the fund will continue to outperform its peers or benchmark over a market cycle:
| Mutual Fund | Assets Under Management | Expense Ratio | Minimum Investment |
| Vanguard International Core Stock Fund Investor Shares (ticker: VWICX) | $2 billion | 0.48% | $3,000 |
| Fidelity 500 Index Fund (FXAIX) | $592.7 billion | 0.015% | $0 |
| T. Rowe Price Communications & Technology Fund (PRMTX) | $9.3 billion | 0.77% | $2,500 |
| Fidelity Select Pharmaceuticals Portfolio (FPHAX) | $1.7 billion | 0.7% | $0 |
| Dodge & Cox Global Bond I (DODLX) | $3.4 billion | 0.45% | $2,500 ($1,000 if held in an IRA) |
| Nuveen Quant Small/Mid Cap Equity Premier (TSMMX) | $1.4 billion | 0.64% | $0 |
| Manning & Napier High Yield Bond W (MHYWX) | $1.3 billion | 0.11% | $0 |
Vanguard International Core Stock Fund Investor Shares (VWICX)
International exposure is key to a well-diversified portfolio. If and when the U.S. economy falls into a downturn, having investments based in other countries could buffer your portfolio. This is what VWICX aims to provide as a core international stock fund.
The portfolio includes both developed and emerging market exposure. Emerging markets are countries whose economies are still developing. This can make investments in these areas more volatile, but also potentially more lucrative as they tend to have greater growth potential than developed nations.
VWICX’s managers are bullish on emerging markets with nearly one-quarter of the portfolio based in such regions. The remaining 86-stock portfolio consists of European, Pacific and North American countries, but nothing in the U.S.
Morningstar analysts applaud its “sound investment process and strong management team.” It’s also available in Admiral shares with a 0.38% expense ratio if you can invest at least $50,000.
Fidelity 500 Index Fund (FXAIX)
FXAIX is proof that ETFs aren’t necessarily the lowest-cost option. 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 version of an S&P 500 mutual fund. It invests at least 80% of its assets in the S&P 500. This means you’ll get exposure to the largest names on Wall Street, including Apple Inc. (APPL), Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA). You’ll also get a lot of tech exposure, with over 30% of the portfolio in these types of companies.
So, next time you find yourself eyeing an S&P 500 ETF, make sure to give FXAIX due consideration.
[READ: 7 Best Electric Vehicle ETFs to Buy]
T. Rowe Price Communications & Technology Fund (PRMTX)
For a more sector-specific, top-rated mutual fund, there is PRMTX. It gets top marks from Morningstar and ranks high on U.S. News & World Report’s best communications mutual funds list.
The fund invests in communications and technology companies the managers believe will provide good capital appreciation. And they’re not afraid to look outside of the U.S. to find such prospects.
“This strategy’s horizons stretch beyond companies siloed in the communications sector, which gives it greater flexibility than competing offerings,” writes Morningstar senior analyst Adam Sabban.
The fund manager typically invests 70% to 80% of the portfolio in “innovative companies with some tie to the broader theme of communications and the rest in companies that provide the connectivity or infrastructure to support their innovation,” Sabban writes. This balance is key because it helps moderate the overall risk, he adds.
Note that the expense ratio may increase to 0.82% in 2027 when the fund’s current contractual fee waiver expires.
Fidelity Select Pharmaceuticals Portfolio (FPHAX)
If you think a recession may be in America’s near future, health care may be a good place to put your money. The sector is a defensive play, meaning it tends to hold up better than other sectors during downturns.
People may cut back on their entertainment and retail shopping when money gets tight, but they aren’t likely to stop taking their medications. Hence, pharmaceutical companies — and the portfolios that hold them — can continue thriving even in bad economic conditions.
The Fidelity Select Pharmaceuticals Portfolio is a great way to invest in the sector. It invests mostly in companies that research, develop, manufacture, sell or distribute drugs of all types. But it likes to make concentrated bets within the sector. More than one-fifth of the 72-stock portfolio is invested in Eli Lilly & Co. (LLY). Nearly three-quarters of the portfolio is in the top 10 holdings.
But these bets have been paying off: The fund has returned an impressive 35% over the past year and nearly 10% over the past 10 years.
Dodge & Cox Global Bond I (DODLX)
Another place you may want to be if a recession occurs is fixed income. The Dodge & Cox Global Bond fund is a “top-notch offering in the global-bond space,” according to Morningstar Director Mara Dobrescu. She applauds the managers’ “patient and disciplined approach” as well as the fund’s low fees, which fall well below the category average of 0.68%.
As the name suggests, the fund invests in bonds from around the world, with 25 countries represented in the portfolio currently. This can add another layer of risk mitigation through diversification. The 30-day SEC yield of 4.67% can be a nice cushion for your portfolio, too.
The fund seeks to maximize total return while preserving capital. It stays predominantly in the investment-grade space, but will venture below. Currently, 17% of the portfolio is in non-investment-grade debt.
Nuveen Quant Small/Mid Cap Equity Premier (TSMMX)
For a more creative approach to small- and mid-cap stocks, you might consider the Nuveen Quant Small/Mid Cap Equity Premier fund. It uses quantitative models based on financial and investment theories to select stocks from the Russell 2500 index, which holds the smallest companies in the Russell 3000 index.
Whatever quantitative alchemy the fund managers are using has been working for TSMMX: The fund has outperformed the Russell 2500 index by almost 4% over the past five years. It’s also well diversified with only 7% of the fund in the top 10 of its 363 holdings.
Note this is considered a very aggressive fund by Morningstar, though below average risk for the small blend category in general. But with a $0 investment minimum, you can always wade in slowly.
Manning & Napier High Yield Bond W (MHYWX)
If interest rates do start declining as many predict, bonds won’t be as appealing of a place to be as in recent years. But this doesn’t mean you need to abandon fixed income entirely. Investing is all about finding balance, such as the balance between risk and return, which MHYWX does well.
While it’s a high-yield bond fund, meaning it invests primarily in non-investment-grade debt, it still manages to be below-average risk relative to its category peers. At the same time, it provides among the highest returns — including a trailing-12-month yield of nearly 8%.
The irony of this mutual fund is that it invests largely in ETFs. So you could say that you’re getting the best of both worlds here, all while only paying 0.11% in expenses. There’s also no minimum investment.
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7 Best Mutual Funds to Buy Now originally appeared on usnews.com
Update 11/07/24: This story was published at an earlier date and has been updated with new information.
