Past performance is no guarantee of future results, but if you’re looking for the best mutual funds to buy now, historical returns are at least a decent place to start your search.
Because if a fund manager is able to keep the ship ahead during a full market cycle that includes both bear and bull stages, that’s a good indication of a smart theme, a competent manager or both.
For example, the past 10 years include the mature stage of the previous bull market, a crash (that was the worst in a generation) and the recovery from that, and what now appears to be the mature stage of the current bull market.
A decade of historical returns may not predict future performance, but it can point to a larger trend of outperformance that could continue for years to come.
So with that backdrop, I give you the 10 best mutual funds of the past 10 years, ordered from “worst” to best.
10 Best Mutual Funds of the Past 10 Years: Prudential Jennison Health Sciences (PHSZX)
10-Year Annualized Return: 12.63%
Expenses: 0.83%, or $83 for every $10,000 invested
Our final entry in the best funds of the past 10 years is another healthcare sector fund, Prudential Jennison Health Sciences (PHSZX).
The past decade’s outstanding performance for PHSZX was due to the big returns of biotechnology and pharmaceutical companies, which are plentiful in the fund’s portfolio. Recent top holdings included BioMarin Pharmaceuticals Inc. (BMRN), Celgene Corporation (CELG) and Bristol-Myers Squibb Co (BMY).
Will healthcare stocks continue their dominance over the next decade? And what about the technology sector funds that have a strong presence in list of best funds of the past 10 years? Intuitively, one would guess that these sectors can benefit from the aging baby-boom generation and the ongoing transition to Internet commerce.
But just remember that while the mutual funds focusing on one sector can produce index-beating returns, they can also deliver disappointing declines in value.
New money doesn’t have to worry about suffering those declines in PHSZX, though. Like several of the best actively managed healthcare funds, PHSZX is closed to new investors.
10 Best Mutual Funds of the Past 10 Years: T. Rowe Price Media and Telecommunications (PRMTX)
10-Year Annualized Return: 12.72%
Establishing an Internet and technology presence in our best mutual funds list is T. Rowe Price Media and Telecommunications (PRMTX).
PRMTX invests in stocks of tech firms but also stretches into the overlapping areas of media and telecommunications companies. Therefore the portfolio holds stocks like Amazon.com, Inc. (AMZN), Priceline Group Inc (PCLN) and T-Mobile US Inc (TMUS).
With the world firmly in the Information Age, there is no surprise that mutual funds like PRMTX have produced such stellar returns in past decade.
Moreover, it’s likelier than not that we’ll see funds like this perform well over the next decade, too.
10 Best Mutual Funds of the Past 10 Years: ProFunds Internet UltraSector (INPIX)
10-Year Annualized Return: 12.85%
There’s certainly going to be a risk/reward theme among our best funds of the past 10 years, and that starts with ProFunds Internet UltraSector (INPIX).
This fund achieved big performance by taking high relative market risk, as INPIX seeks performance results that are 1.5 times the Down Jones U.S. Internet Composite Index.
With INPIX, investors will get a supercharged dose of big Internet companies like Amazon and Alphabet Inc (GOOG, GOOGL), as well as names like Salesforce.com, Inc. (CRM) and PayPal Holdings Inc (PYPL).
Like other ProFunds offerings, the minimum initial investment is above-average at $15,000. And the leveraged strategy employed by INPIX means that investors thinking of buying shares must have the stomach for a volatile ride for the chance of obtaining returns greater than the benchmark.
10 Best Mutual Funds of the Past 10 Years: Fidelity Select Software & IT Services Portfolio (FSCSX)
10-Year Annualized Return: 13.1%
Technology stocks were big performers in the past decade, which is why Fidelity Select Software & IT Services Portfolio (FSCSX) is one of several IT-focused funds atop our list.
The FSCSX portfolio invests at least 80% of its assets in tech firms that are primarily engaged with software or information-based services. Therefore you’ll see big software names like Microsoft Corporation (MSFT), but also firms like Alphabet and Facebook Inc (FB) that really changed the tech industry in the past decade.
Tech and healthcare can both be a little volatile, but both are going to produce long-term results over the next decade. Most investors would be wise to hold a fund like FSCSX.
10 Best Mutual Funds of the Past 10 Years: Fidelity Select Retailing Portfolio (FSRPX)
10-Year Annualized Return: 13.23%
Put simply, there are no better mutual funds that focus on retail stocks than Fidelity Select Retailing Portfolio (FSRPX).
Although the past 10 years won’t be remembered as the decade of the consumer, there were more than a handful of outstanding consumer cyclical stocks — such as recent top holdings for FSRPX, Amazon, Home Depot Inc (HD) and Netflix, Inc. (NFLX) — that had strong periods of performance that outpaced the major market indices.
The next 10 years will likely see more growth for retailers that can find ways to deliver the kinds of products and services that consumers demand, and by the preferred delivery method.
FSRPX stands to benefit from that growing trend.
10 Best Mutual Funds of the Past 10 Years: T. Rowe Price Global Technology (PRTGX)
10-Year Annualized Return: 13.28%
To find the best growth ideas, some of the best funds look all over the world and T. Rowe Price Global Technology (PRGTX) is exceptional in this global strategy.
PRGTX’s objective is long-term capital growth and the global strategy will normally result in greater than 30% allocation to developed and emerging foreign markets. And the technology objective means portfolio exposure of up to 80% in tech stocks, such as GOOG and Tesla Motors Inc (TSLA) in the U.S. and foreign stocks like Liberty Global PLC (LILA) and Tencent Holdings Ltd (TCTZF).
PRGTX also makes a strong case for wisdom of buying and holding low-cost, actively managed funds with solid performance histories. And PRGTX achieves its results without leverage.
10 Best Mutual Funds of the Past 10 Years: ProFunds UltraNasdaq 100 (UOPIX)
10-Year Annualized Return: 13.73%
If you want the best performance over a 10-year period, you’ll need to be willing to take on extra risk, and ProFunds UltraNasdaq 100 (UOPIX) is a case in point in that regard.
UOPIX uses leveraging techniques to seeks performance that is 2 times the return of the Nasdaq-100 Index for a single. Therefore investors thinking of buying shares need to be prepared for short-term volatile swings in value in exchange for the potential for gains larger than the index over a long period of time, such as 10 years.
The Nasdaq-100 Index consists of roughly 100 of the largest non-financial stocks from the larger Nasdaq Composite. Therefore you end up with big growth stocks like Amazon and Apple Inc. (AAPL).
Also note that the minimum initial investment for UOPIX is $15,000, which is much higher than average for mutual funds.
10 Best Mutual Funds of the Past 10 Years: Rydex Nasdaq-100 2x Strategy (RYVLX)
10-Year Annualized Return: 13.84%
Another fund that uses leveraging techniques to magnify its gains is Rydex Nasdaq-100 2x Strategy (RYVLX).
RYVLX is nearly identical to UOPIX in that it uses the same strategy to seek 200% the results of the daily moves on the Nasdaq-100 Index.
The main differences between the two funds are initial minimums and expenses. Rydex’s RYVLX has a $2,500 minimum for the first purchase and ProFunds’ UOPIX is much higher at $15,000. But RYVLX has a front load of 4.75% and an expense ratio of 1.8%, whereas UOPIX does not charge a load and its expense ratio is lower at 1.48%.
With all other things being equal (namely the index tracking and leveraging techniques), the lower expenses of UOPIX would be expected to be a slight performance advantage over RYVLX.
10 Best Mutual Funds of the Past 10 Years: T. Rowe Price Health Sciences (PRHSX)
10-Year Annualized Return: 14.59%
Another one of the best funds to find its way to the top by focusing on the healthcare sector is T. Rowe Price Health Sciences (PRHSX).
Like several of the best funds of the past decade, PRHSX benefits by exposure to biotechnology stocks but it also diversifies across other subsectors of healthcare, such as health services, medical products and devices, and life sciences. But unlike some of the top performers of the past 10 years, PRHSX achieved its returns without leverage techniques.
PRHSX is currently closed to new investors. Therefore investors looking to buy shares of PRHSX who don’t already own shares will have to wait until the fund reopens.
10 Best Mutual Funds of the Past 10 Years: ProFunds Biotechnology UltraSector ProFund (BIPIX)
10-Year Annualized Return: 15.24%
The incredible rise of biotechnology stocks is one of the biggest investing stories of the past decade.
The big performance of ProFunds Biotechnology UltraSector Profund (BIPIX) certainly helps illustrate that tale.
BIPIX also tells a cautionary tale about risk and return. The fund employs leveraged investment techniques to achieve performance results that are 1.5 times of the Dow Jones U.S. Biotechnology Index. This means investors can reap the benefits of magnified gains in up markets, but they’ll also see bigger declines when biotechnology stocks are out of favor.
But if investors that feel strongly about stocks like BIPIX top holdings Gilead Sciences, Inc. (GILD), Amgen, Inc. (AMGN) and AbbVie Inc (ABBV), and are willing to take on extra market risk, BIPIX isn’t just a great past performer — it’s still worth a look.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds PRHSX, in some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, South Carolina. Under no circumstances does this information represent a recommendation to buy or sell securities.