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.
[Sign up for stock news with our Invested newsletter.]
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 | Forward Dividend Yield | Minimum Investment |
Fidelity Series Large Cap Growth Index (ticker: FHOFX) | $1.6 billion | 0% | 0.6% | $0 |
Vanguard International Core Stock Fund Investor Shares (VWICX) | $2 billion | 0.48% | 2.0% | $3,000 |
Fidelity Select Semiconductors (FSELX) | $20.6 billion | 0.65% | 0.0% | $0 |
Nuveen Quant Small/Mid Cap Equity (TSMMX) | $1.5 billion | 0.64% | 0.6% | $0 |
Dodge & Cox Global Bond I (DODLX) | $3.2 billion | 0.45% | 4.7% | $2,500 ($1,000 if held in an IRA) |
Manning & Napier High Yield Bond W (MHYWX) | $1.4 billion | 0.11% | 7.7% | $0 |
T. Rowe Price Capital Appreciation (PRWCX) | $64.2 billion | 0.71% | 2.2% | $2,500 |
Fidelity Series Large Cap Growth Index (FHOFX)
Most investors start building their portfolios around a U.S. large-cap fund. You could do this through an S&P 500 fund for a nominal fee — the Fidelity 500 Index Fund (FXAIX), for example, has an expense ratio of only 0.015% — or you could pay nothing for similar large-cap exposure through a fund like FHOFX. You read that right: This fund has a zero expense ratio. It also has no investment minimum and a solid large-cap growth portfolio of nearly 400 stocks.
The same names top the list in FHOFX as you’d find in an S&P 500 list. These include Apple Inc. (AAPL), Nvidia Corp. (NVDA) and Microsoft Corp. (MSFT), albeit in slightly different proportions since FHOFX tracks the Russell 1000 Growth Index.
But this slight difference in allocations can make all the difference in performance: FHOFX beats S&P 500 funds like FXAIX in average annual returns on a one-, three- and five-year performance basis. While FXAIX returned 25% over the past year, FHOFX returned nearly 33.4% — all while costing less. What more could you ask for?
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 Europe and emerging markets with nearly half and one-quarter of the portfolio based in such regions, respectively. The remaining 92-stock portfolio consists of the 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.
[READ: How Will Tariffs Affect Your Investments?]
Fidelity Select Semiconductors (FSELX)
If you want to jump on the tech band wagon, there’s likely no better way to do so than with FSELX. It’s the only technology mutual fund awarded five stars and a gold badge by Morningstar.
FSELX invests in companies that design, make or sell electronic components like semiconductors. The fund has benefited from increasing demand for these devices, which are in just about every high-tech device from smartphones and laptops to solar cells and automotive parts. FSELX returned over 43.5% in the past year and nearly 31% over the past five years. If Morningstar analysts are right in awarding it a gold badge, it should continue to be an outperformer in the near term.
Nuveen Quant Small/Mid Cap Equity (TSMMX)
Large stocks may have more media attention, but there’s an argument for including smaller, lesser-known companies in your portfolio. Namely, smaller companies generally have greater growth potential. It’s a lot easier to grow when you’re $300 million in market cap versus $3 trillion. The drawback to small-cap funds is they tend to be more volatile, but the extra bumps can be worth the reward, such as with TSMMX.
The fund 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 nearly 4% over the past five years. It’s also well diversified with only 8% of the fund in the top 10 of its 357 holdings.
Dodge & Cox Global Bond I (DODLX)
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 24 countries represented in the portfolio currently. This can add another layer of risk mitigation through diversification. The 30-day SEC yield of 5.06% can be a nice cushion for your portfolio, too.
Manning & Napier High Yield Bond W (MHYWX)
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 7.7% — all while only paying 0.11% in expenses. There’s also no minimum investment.
T. Rowe Price Capital Appreciation (PRWCX)
If you prefer more of a one-fund solution or to combine your equity and fixed income into one investment, PRWCX is the fund for you in 2025.
It strikes a roughly 60-40 balance between stocks and fixed income, with some foreign investments thrown in for good measure. This gives it a nicely moderate allocation that would get Goldilocks approval. It also means you’ll see dampened returns relative to a full-stock fund, but hopeful equally dampened declines.
The fixed-income portion of the portfolio provides an added benefit of moderate income. The current 30-day SEC yield is a tidy 2.2%.
More from U.S. News
7 Bank Stocks to Buy for the Dividends
What ETF Has the Highest Dividend Yield?
7 Best International Stocks to Buy
7 Best Mutual Funds to Buy Now originally appeared on usnews.com
Update 01/28/25: This story was previously published at an earlier date and has been updated with new information.