5 Best Mutual Funds of the First Quarter

Some of these funds have doubled and even tripled the Dow

By Jeff Reeves, Executive Editor of InvestorPlace.com


401k investors typically are limited in their options, depending on what their employer provides. But if you can roll over your 401k into an IRA account, then a world of opportunities will open up to you. Why settle for the one or two bond funds your 401k manager approved when you can invest in hundreds of other mutual funds — many of which are performing significantly better?

If you have an IRA account but are reluctant to trade individual equities, you’re probably wondering where to stash your funds now that the bull market clearly is making its presence felt. Well, past performance is no guarantee of future returns, but here are some high-flying mutual funds that have blown the doors off in the first quarter of 2012.

The following are the top five mutual funds based on performance through March 30, separated by investment class:

Domestic Large Cap: Touchstone Sands Capital Select Growth

Touchstone Sands Capital Select Growth (MUTF:PTSGX) has more than tripled the Dow Jones year-to-date and doubled the S&P 500, with returns of about 24%.

It’s no secret as to why — the stock market has been in bull-market mode, and growth stocks in tech have been on fire. Touchstone’s top positions include Visa (NYSE:V), Apple (NASDAQ:AAPL) and Salesforce.com (NYSE:CRM), which have all outperformed the market significantly.

PTSGX has more than $1 billion under management and gets Morningstar’s top five-star rating. Although it has a modest expense ratio of 1.4%, the pop of this actively managed fund makes that price more than fair. Manager Frank Sands has been running this fund since 2000 with great long-term success, and the track record continues in 2012.

Domestic Small Cap: Artisan Small Cap Fund

The Artisan Small Cap Fund (MUTF:ARTSX) is a bit pricey, with an 1.66% expense ratio. But with returns of 17% year-to-date, doubling the Dow Jones and easily outpacing the benchmark Russell 2000’s 13% gains, this fund might be worth it.

Artisan profited nicely in Q1 thanks to the likes of top holdings like biotech Cepheid (NASDAQ:CPHD), auto parts stock LKQ Corporation (NASDAQ:LKQX) and medical stock athenahealth (NASDAQ:ATHN).

The mutual fund gets four stars from Morningstar and since 2010 would have turned $10,000 into $16,000. The fund has about $500 million in assets under management.

International Equity: Lazard Developing Markets

Lazard Developing Markets Equity Fund (MUTF:LDMOX) has tacked on an impressive 18% year-to-date, significantly topping the benchmark MSCI EAFE Index returns of about 8% in the same period.

Lazard’s fund achieved this in part by focusing on opportunities outside of conventional emerging markets like China. Its top holdings right now include Sberbank (PINK:SBRCY) and Alliance Oil of Russia, along with South Africa’s Exxaro Resources (PINK:EXXAY).

The four managers behind this fund have been there since its launch in 2008, and continue a strong track record that has won them Morningstar’s top five-star rating. The expense ratio of this fund is 1.85% — rich, but not uncommon in actively managed global funds — but net assets remain a mere $320 million. Clearly more investors need to hear about the potential of this global fund.

Sector Fund: Fidelity Select Computers

Obviously, sector funds are more a product of the exterior environment than any great picks internally. You either have a good sector or a bad one. And this past quarter, Fidelity Select Computers Portfolio (MUTF:FDCPX) had the best sector of them all as tech rallied strongly. The result is a 26% gain for the fund.

Top holdings include high-fliers Apple and EMC Corp. (NYSE:EMC), which are both up more than 35% year-to-date, among others.

The expense ratio is a decent 0.89% and the fund gets four stars from Morningstar. But remember, sector rotation swings both ways — so Q1’s sector standout might very likely fall by the wayside looking forward.

Bond Fund: Invesco High Yield

Not surprisingly, big returns are very difficult to come by in the bond market these days with interest rates so low. The best bond funds, however, have turned to high-yield corporate bonds and international debt to get returns that at least pace the market.

The Invesco High Yield Fund (MUTF:HYINX) has managed to wring out almost 6% returns year-to-date, just less than the Dow, with corporate “junk” bonds. They can be risky, but buying these bonds is one way to find significant yield — including bonds from Tenet Healthcare (NYSE:THC) that mature in 2015 and yield a plump 9.25%.

The vast majority of bond funds, however, couldn’t even crack 5% returns year-to-date. So winning this category is really just being the “least bad” of a horrible bunch. Of course, like sector funds, it’s not really the manager’s fault — it’s just the macroeconomic environment pushing investors into other areas.

Jeff Reeves is the editor of InvestorPlace.com, and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace?.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2012/04/5-best-mutual-funds-of-the-first-quarter/.

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