Best mutual funds in 2022

With literally thousands of available mutual funds, how do you find the top ones for your portfolio? Bankrate has highlighted some of the best mutual funds based on Morningstar research.

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Mutual funds are one of the most popular ways to invest in the stock and bond markets, especially as part of employer-sponsored 401(k) plans and self-directed IRAs. Mutual funds allow you to buy a diversified collection of assets in just one fund, often at low cost. So you’ll be able to create a diversified portfolio quickly, easily and cheaply.

But with literally thousands of available funds, how do you find the top ones for your portfolio? Below we highlighted some of the best mutual funds based on Morningstar research.

Top performing low-fee mutual funds

We selected its top funds based on the following criteria, and included only funds that were investible for regular investors (i.e., not those with $5 million minimum investments):

Below are some of the best mutual funds, with performance data as of Dec. 31, 2021.

Schwab Fundamental U.S. Large Company Index Fund (SFLNX)

This fund invests in large publicly traded companies and tracks the total return of the Russell RAFI U.S. Large Company Index.

Voya Russell Large Cap Growth Index Fund (IRLNX)

This index fund tracks the performance of the Russell Top 200 Growth index, which includes large stocks.

Vanguard Windsor II Fund Investor Shares (VWNFX)

This fund invests in large publicly traded companies that are value priced.

Fidelity 500 Index Fund (FXAIX)

This fund invests in large publicly traded companies and may look much like an S&P 500 index fund.

Shelton NASDAQ-100 Index Direct (NASDX)

This fund tries to replicate the performance of the Nasdaq-100 index.

Best mutual funds for the long term

Using the same criteria as before, we sifted through funds that had great ten-year track records. Below are some of the best mutual funds, with performance data as of Dec. 31, 2021.

Shelton NASDAQ-100 Index Direct (NASDX)

This fund tries to replicate the performance of the Nasdaq-100 index.

Fidelity NASDAQ Composite Index (FNCMX)

This index fund tracks the performance of the entire Nasdaq stock exchange, which includes over 3,000 stocks.

Voya Russell Large Cap Growth Index Fund (IRLNX)

This index fund tracks the performance of the Russell Top 200 Growth index, which includes large stocks.

Hartford Core Equity R5 (HGITX)

This fund invests primarily in large publicly traded companies that are growth-focused and value-priced.

Voya Russell Large Cap Index Portfolio (IIRLX)

The fund targets returns that correspond to the total return of the Russell Top 200 Index.

How to give your investments a boost through mutual funds

One of the main benefits of owning mutual funds is the diversification they’re able to offer for relatively low investment amounts and fees. For just an investment of a few thousand dollars, mutual funds can give you a stake in hundreds of companies across different industries, allowing you to build a diversified portfolio.

Ultimately, you’ll make money in mutual funds if the underlying securities in those funds perform well. For stock mutual funds, you’ll need the stocks held in the fund to appreciate in value in order to benefit as a fund investor. You’ll also benefit when those companies pay dividends.

How to pick the best mutual funds for your portfolio

Choosing the best mutual fund for you depends a lot on what you need, in particular your risk tolerance and time horizon. But it also depends on what else you already have in your portfolio. Here are a few key questions to consider in finding the best mutual fund for you:

It’s important to know your portfolio and financial situation so that you can assess what mutual fund may be best for you. But even when you find a fund type that you like, you’ll also want to assess which funds are better along a few dimensions.

Ask yourself the following questions:

Some funds (such as index funds) invest in literally the same stocks or bonds as other similar funds. So you can find the same “product” for a lower expense ratio by searching around. For example, any fund based on the Standard & Poor’s 500 index will have substantially the same holdings as another, so the real basis for comparison is the fund’s fees. As the old investor saying goes, “Fees are certain but returns are not.”

Types of mutual funds

Mutual funds come in a variety of types and are categorized by the type of investments they own – stock funds, bond funds, money market funds, balanced funds and target date funds.

Stock mutual funds

Stock mutual funds own stocks exclusively, giving them the potential for greater volatility – both higher overall returns and lower overall returns than other types of mutual funds. Included among stock mutual funds are some of the most popular index funds, where the fund is based on the Standard & Poor’s 500 index of top U.S.-based companies. From here they may be further divided into funds focused on growth stocks, value stocks or some combination of the two.

Bond mutual funds

Bond mutual funds own bonds exclusively, making them generally less volatile than stock funds. But they’re also likely to deliver lower returns over time than their stock-based counterparts.

Money market mutual funds

These mutual funds own safe securities such as cash and very short-term debt, making them generally safer than either stock- or bond-based mutual funds but also lower-return. That said, unlike FDIC-backed money market accounts at a bank, money market mutual funds can lose principal, meaning it’s possible, though not likely, that you won’t get your whole investment back.

Balanced mutual funds

These mutual funds can invest in stocks, bonds and money market instruments, and generally can offer lower volatility in exchange for lower overall returns. How much is allocated to each type of asset class depends on the fund’s investment manager and its expectations for return.

Target-date mutual funds

Target-date mutual funds are popular in 401(k) accounts, and they typically invest in stocks, bonds and money market instruments. Investors pick when they want to access their money (say, at retirement) and then the target date fund selects investments that are appropriate for that time period, reducing risk as the investor nears the target date. Usually this means the fund shifts investments from higher-risk (but high-return) stocks to lower-risk bonds over time.

Alternatives to mutual funds

Last updated on February 3, 2022, and last reviewed by an expert on January 21, 2022.
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