7 Best-Performing Mutual Funds for July 2024
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To determine the best mutual funds measured by five-year returns, we looked at U.S. equity funds with low costs and minimums.
U.S. equity funds like VIGRX and USNQX are among the best-performing mutual funds of the last 5 years.
Managing your portfolio also means managing your expectations, and you should expect different returns from different types of funds.
When shopping for mutual funds, we naturally are curious: Which ones are performing the best today?
While that’s a common place to begin your search, remember you’re shopping for tomorrow when looking for the best mutual funds. Top performers in the short term don’t always become long-term winners.
» Need to back up? How mutual funds work
Best-performing U.S. equity mutual funds
To determine the best mutual funds measured by five-year returns, we looked at U.S. equity funds open to new investors with low costs (expense ratios of 1% or less) and minimum investment requirements of $3,000 or less.
For more on how to choose a mutual fund, skip ahead to this section.
Ticker | Name | 5-Year Return (%) |
---|---|---|
USNQX | Victory NASDAQ-100 Index | 21.1 |
VIGRX | Vanguard Growth Index Investor | 18.61 |
NWJFX | Nationwide NYSE Arca Tech 100 Idx InsSvc | 16.13 |
VQNPX | Vanguard Growth & Income Inv | 15.08 |
USSPX | Victory 500 Index Member | 14.94 |
VPMCX | Vanguard PRIMECAP Inv | 14.88 |
MAEIX | MoA Equity Index Fund | 14.76 |
Source: Morningstar. Data is current as of July 2, 2024, and is intended for informational purposes only, not for trading purposes. |
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How to choose the best mutual funds for you
Mutual funds combine investors' money to purchase investments. Mutual funds create a more diversified portfolio than most investors can on their own. "Mutual funds" as a category includes index funds, exchange-traded funds, bond funds and target-date funds. Mutual fund investors don’t personally own the stock or other investments held by the fund, but they do share equally in the profits or losses of the fund’s total holdings.
Many experts recommend investing through mutual funds, especially index funds, which passively track a market index such as the S&P 500.
» Learn more: Mutual funds versus index funds
When you're ready to invest, here's what to consider:
Decide whether to invest in active or passive funds, knowing that both performance and costs often favor passive investing.
Understand and scrutinize fees. A broker that offers no-transaction-fee mutual funds can help cut costs.
Build and manage your portfolio, checking in on and rebalancing your mix of assets once a year.
» Learn more: How to invest in mutual funds
Average mutual fund return
Managing your portfolio also means managing your expectations, and different types of mutual funds should bring different expectations for returns.
For actively managed investments, particularly those with higher fees, it is difficult to consistently beat the index. In fact, it rarely happens. Most investors would be better served with a passive investment strategy, which could mean a combination of exchange-traded funds and mutual funds that incorporate large-, mid-, and small-cap stocks, as well as international and emerging markets.
Stock mutual funds = higher potential returns (or losses)
Stock mutual funds, also known as equity mutual funds, carry the highest potential rewards, but also higher inherent risks — and different categories of stock mutual funds carry different risks.
For example, the performance of large-cap, high-growth funds is typically more volatile than, say, stock index funds that seek only to match the returns of a benchmark index like the S&P 500.
» Related: Best performing stocks this month
Bond mutual funds = lower returns (but lower risk)
Bond mutual funds, as the name suggests, invest in a range of bonds and provide a more stable rate of return than stock funds. As a result, potential average returns are lower.
Bond investors buy government and corporate debt for a set repayment period and interest rate. While no one can predict future stock market returns, bonds are considered a safer investment as governments and companies typically pay back their debt (unless either goes bust).
» Related: How to start investing in bonds
Money market mutual funds = lowest returns, lowest risk
These are fixed-income mutual funds that invest in top-quality, short-term debt. They are considered one of the safest investments you can make. Money market funds are used by investors who want to protect their retirement savings but still earn some interest — potentially between 1% and 5% a year.
» Related: Learn more about money market funds
Mutual fund fees
Even if you find a low-cost mutual fund, you'll still have to pay some fees. Here are some things to look out for:
Management fees: Also known as "expense ratios," these cover the cost to pay fund managers and investment advisors.
12b-1 fees: Capped at 1%, these fees pay for the cost of marketing and selling the fund and other shareholder services.
Other expenses: These may include custodial, legal, accounting, transfer agent expenses and other administrative costs.
The total annual fund operating expenses are expressed as a percentage of the fund's net average assets.
» How do fees impact returns? Mutual fund calculator
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Can you lose money in mutual funds?
Yes. As with all investments, it is possible to lose money in mutual funds. But if you invest in well-diversified mutual funds with a long investment timeframe, you'll likely benefit from compound interest and grow your money over time.
The bottom line
Chasing past performance may be a natural instinct, but it often isn't the right one when placing bets on your financial future. Mutual funds are the cornerstone of buy-and-hold and other retirement investment strategies.
Likewise, chasing one-year returns is not a wise investment strategy. A good rule of thumb is to look for consistency of returns on a longer time horizon. To get a sense of a longer track record, it would be wise to look at the three, five, and 10-year returns.
Hopping from stock to stock based on performance is a rear-view-mirror tactic that rarely leads to big profits. That's especially true with mutual funds, where each transaction may bring costs that erode any long-term gains.
What's important to consider is the role any mutual fund you buy will play in your total portfolio. Mutual funds are inherently diversified, as they invest in a collection of companies (rather than buying stock in just one). That diversity helps spread your risk.
You can create a smart, diversified portfolio with just a few well-chosen mutual funds or exchange-traded funds, plus annual check-ins to fine-tune your investment mix.
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