If you’re looking for diversified investments, you can’t go wrong with mutual funds. While they have higher expense ratios than ETFs, they are more actively managed. This gives you a better chance at higher returns.
Because mutual funds are actively traded by humans and have plenty of room for error, it’s essential to stick with those that perform well over the last ten years or so. While it’s hard to pick mutual funds that do well at the moment, we look at those that do well overall, which come from institutions we can trust.
Vanguard Healthcare Fund (VGHCX)
If you have an interest in the healthcare industry, this mutual fund diversifies in both domestic and international investments. This helps diversify the risk. It invests not only in hospitals but also in medical care supplies and medicine.
The VGHCX mutual fund has a low expense ratio of 0.28 percent and requires a minimum investment of $3,000, which is average for mutual fund investments.
T. Rowe New Horizons Fund (PRNHX)
Do you like to invest in small companies that have great potential? That’s what the T. Rowe New Horizons mutual fund invests in. Its focus is on small and mid-cap companies that are innovative and introducing new products and services. You’ll find a lot of technology companies in this fund and a variety of other newcomers.
The T. Rowe New Horizons Fund requires a minimum investment of $2,500 and has an expense ratio of 0.77 percent.
Vanguard Wellington Fund Investor Shares (VWELX)
If you’re looking for a mutual fund that’s seen it all, it’s the Vanguard Wellington Fund Investor Shares. This is Vanguard’s oldest mutual fund that’s been around since 1929. It’s been through just about every financial crisis the country has seen thus far.
This mutual fund is more conservative, focusing on dividend-paying stocks as well as bonds. It’s an excellent option for those looking for a lower risk. The Vanguard Wellington Fund Investor Shares mutual fund requires a $3,000 minimum investment and has a 0.25 percent expense ratio.
Fidelity Magellan (FMAGX)
Around since 1963, this mutual fund has also been through just about every financial crisis, minus the Great Depression. It focuses on large-growth companies, so it does bear a little more risk, but it solidly performs year after year.
The Fidelity Magellan mutual fund doesn’t have a minimum investment requirement, and it has a 0.67 percent expense ratio.
Fidelity Select Software & IT Services Fund (FSCSX)
The Fidelity Select Software and IT Services Fund focuses on technological companies, including software. While most of the assets in this fund are in technology that you may not know, it does include some big names like Google and Apple.
This fund has been through some of the fiercest technological storms and made it through still standing. There is no minimum required investment for the Fidelity Select Software & IT Services Fund, and it has an expense ratio of 0.72 percent.
How Should you Choose Mutual Funds?
You know some of the best performing mutual funds, but how do you choose the funds right for you? While each investor has different needs and wants, here are a few factors to consider:
- What do you want to invest in? Ask yourself where you want your dollars to go. Don’t just look at the returns, but at each investment the mutual fund makes. While the investments may change over time, you’ll at least have an idea of what the fund manager focuses on before investing in it.
- Expense ratios – Because mutual funds are actively traded, you may face higher expense ratios than you would with an index fund. Know the expense ratio and see if it fits within your investment strategy.
- Diversification – You want a mutual fund that diversifies to reduce the risk of a total loss. While you want to offset your capital gains to lower your tax liability, choosing a mutual fund without stable overall returns won’t help your investment strategy.
Do your research before investing in a mutual fund. Know the minimum investment required and what it will cost you. Think about your investment strategy, too – is it short or long-term? Does the mutual fund fit in with your plan, or will it skew your results? Do your due diligence when investing, and you’ll find the funds that help you reach your financial goals.