Although banking on individual stocks may offer the biggest reward potential, for those that want higher probability of success (while sacrificing maximum upside) should consider the best mutual funds on tap. As the U.S. Securities and Exchange Commission (SEC) explains, “[a] mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.”
Primarily, as the US SEC points out, investors seek out top mutual funds for professional management. Essentially, the fund managers do the research for you, allowing you to sit back and reap the rewards. As well, another attribute centers on diversification. Again, while this might limit maximum reward potential, the broader canvas facilitates higher success probability.
As well, the regulatory agency points out that “[m]ost mutual funds set a relatively low dollar amount for initial investment and subsequent purchases.” Combined with multiple economic warnings flashing since the start of the pandemic, going with these asset baskets makes sense. Here are the mutual funds to buy in May 2023.
|FGRTX||Fidelity Market Cap Stock Fund||$18.42|
|PRDGX||T. Rowe Price Dividend Growth Fund||$66.12|
|VGWAX||Vanguard Global Wellington Fund||$30.09|
|FSAEX||Fidelity Series All-Sector Equity Fund||$9.51|
|SGGDX||First Eagle Gold Fund Class A||$26.59|
|GSIFX||Goldman Sachs International Equity ESG Fund||$26.49|
|VSIAX||Vanguard Small Cap Value Index Fund||$66.36|
Fidelity Mega Cap Stock (FGRTX)
Targeting the most valuable enterprises in the market today, Fidelity Mega Cap Stock Fund (MUTF:FGRTX) offers an excellent starting point for actively managed funds. Since the beginning of this year, FGRTX gained more than 7% of equity value. That’s noticeably higher than the Dow Jones Industrial Average, making FGRTX one of the best performing mutual funds this year.
In terms of holding categories, the vast majority – specifically 88% – of the Fidelity Mega Cap is aligned with (domestic) stocks. Coming in a very distant second place is foreign stocks at 9.7%. Lastly, 2.5% of the fund is directed toward cash. As for individual company holdings, Exxon Mobil (NYSE:XOM) takes pole position at 8.67% of total net assets. That’s followed by financial giant Wells Fargo (NYSE:WFC) at 6% and technology stalwart Microsoft (NASDAQ:MSFT) at 5.92%.
Finally, FGRTX ranks among the best mutual funds because of reasonable fees. Its net expense ratio is 0.61% compared to the category average 0.86%. And its management fee is 0.42% compared to the category average 0.5%.
T. Rowe Price Dividend Growth Fund (PRDGX)
As the name suggests, the T. Rowe Price Dividend Growth Fund (MUTF:PRDGX) focuses on publicly traded companies that provide passive income. Given the shaky economic environment we’re in, the PRDGX represents one of the top mutual funds for concerned investors. However, the performance lags a bit from other actively managed funds. Since the start of the year, PRDGX gained just under 2%.
For holdings, the T. Rowe Price Dividend Growth focuses mostly on U.S.-based securities, amounting to 88%. In a very distant second sits foreign stocks, with an allocation of 7.8%. Finally, the rest of the fund is geared toward cash at 4.3%.
Moving onto the individual names, Microsoft takes top spot at 4.21% of total net assets. In second place (in terms of corporations) is Apple (NASDAQ:AAPL) at 2.82%. Rounding out the top three is health insurance stalwart UnitedHealth Group (NYSE:UNH) at 2.8%. Lastly, PRDGX also benefits from favorable fees. Its net expense ratio is 0.64% while its management fee is 0.48%. Thus, it’s worth consideration for a diversified basket of best mutual funds.
Vanguard Global Wellington Fund (VGWAX)
Focused on providing long-term capital appreciation and moderate current income, the Vanguard Global Wellington Fund (MUTF:VGWAX) invests 60% to 70% of its assets in dividend-paying (and to a lesser extent non-passive-income-providing) securities of large and mid-sized U.S. and foreign companies. Since the start of this year, VGWAX gained a bit more than 2% of market value. Therefore, it’s one of the top mutual funds for balanced exposure.
Regarding category holdings, Vanguard Global provides an eclectic approach to investing. Just a bit under 36% of VGWAX is directed toward domestic stocks. In a close second is foreign stocks at 28.2%. Then comes bonds at 20.8%, followed by foreign bonds at 11.1%. Cash rounds out the allocation at 5.2%.
For top individual holdings, Microsoft again secures pole position at 1.83% of total net assets. That’s followed closely with Johnson & Johnson (NYSE:JNJ) at 1.61%. Just below JNJ sits AstraZeneca (NASDAQ:AZN) at 1.6%. In closing, the VGWAX features a net expense ratio of 0.32%, far lower than the category average of 0.96%. Thus, it’s one of the best mutual funds for those seeking discounts.
Fidelity Series All-Sector Equity (FSAEX)
Focused on facilitating large growth for its investors, the Fidelity Series All-Sector Equity (MUTF:FSAEX) represents one of the highest-rated mutual funds for those seeking some spice in their portfolio while not wanting to absolutely nuke it. So far this year, the FSAEX fund gained almost 8% of market value, thus making it one of the top mutual funds for strong performance.
Still, just keep in mind the tried-and-true adage: higher reward potential almost always means greater risk profile. Regarding asset allocation, the vast majority of the FSAEX centers on domestic stocks at 97.2%. Sitting well below that figure is foreign stocks at only 1.8%. Cash also comes in at 1.8%, while the remainder of the fund is dedicated toward other investments (0.1%). For individual companies, Microsoft and Apple take the top two positions at 5.48% and 5.11%, respectively. E-commerce giant Amazon (NASDAQ:AMZN) rounds out the top three with 2.7% of total net assets.
First Eagle Gold Fund (SGGDX)
While commodities typically present high risk to investors because of their volatility, at the present juncture, exposure to hard assets – specifically precious metals – could be useful for market participants. Enter First Eagle Gold Fund (MUTF:SGGDX). As the name implies, First Eagle Gold invests at least 80% of its net assets in gold and/or securities related to gold.
Sure enough, since the Jan. opener, SGGDX gained 15% of market value, thus representing one of the best performing mutual funds. Plus, it’s a much more convenient way of enjoying exposure to the dense and heavy metal. In terms of asset allocation, most of the fund (59.5%) focuses on foreign stocks. In a distant second place is domestic stocks at 20.6%. Coming in third at 17.9% is other investments. Completing the allocation is cash at 2.6%. For individual corporate holdings, the top company is metal streaming giant Wheaton Precious Metals (NYSE:WPM) at 12.66%. Below that is Newmont (NYSE:NEM) at 10.86%.
Goldman Sachs International Equity ESG Fund (GSIFX)
One of the highest-rated mutual funds to consider for those investors focused on higher goals with money, the Goldman Sachs International Equity ESG Fund (MUTF:GSIFX) aligns with the emerging generation’s prioritization of sustainability concerns. At least 80% of the GSIFX fund’s net assets adhere to its environmental, social and governance criteria.
Since the January opener, GSIFX gained over 11% of market value, making it one of the best performing mutual funds. Therefore, going green and doing good can be quite profitable.Regarding asset allocation, 89.3% of the GSIFX focuses on foreign stocks. Sitting several tranches below is domestic stocks at 6.3%. Finally, the rest of the fund is allocated toward cash at 4.5%.
For individual holdings, BNP Paribas (OTCMKTS:BNPQY) takes top position at 4.6% of total net assets. Coming in second for corporate holdings is Rentokil (NYSE:RTO) at 3.9% and Schneider Electric (OTCMKTS:SBGSY) at 3.83%. However, the net expense ratio is on the expensive at 1.18%. This compares unfavorably to the category average 0.97%. Still, if you care about sustainability, GSIFX could be one of the best mutual funds.
Vanguard Small Cap Value Index Fund (VSIAX)
For those that want to dial up the risk-reward profile for their list of best mutual funds, the Vanguard Small Cap Value Index Fund (MUTF:VSIAX) may be an enticing idea. Focused on small-capitalized value stocks, the VSIAX features a more aggressive profile, per Vanguard’s website. Though it enjoys upside potential during bullish cycles, it can be painful during downsides. Since the January opener, VSIAX lost nearly 5% of market value.
Over the past one-year period, the mutual fund dipped almost 9%. At the same time, contrarians might see the red ink as a viable and discounted entry point. Small caps always attract the daredevils because of their massive upside potential. However, betting everything on one or two individual securities is a risky endeavor. With the VSIAX, market participants can enjoy mobility while mitigating downside threats. Still, as the fund’s performance this year proved, even actively managed investments can get squirrely. But if you’re willing to be patient, VSIAX can potentially be rewarding.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.