Mutual fund investing might not be the most thrilling way to manage your investments. However, it’s often more prudent than trying to pick individual stocks. Using top-performing mutual funds in 2024 as the cornerstone of your portfolio—be it for retirement or a taxable brokerage account—can help balance and diversify the risks associated with single-stock investments.
However, this doesn’t mean you should pour all your investments into a single total market index mutual fund. Although, this strategy might be suitable in some circumstances. Moreover, you can apply your analytical skills to select the top-performing mutual funds that are right for you. Do so based on economic conditions, sector performance, risk tolerance, and other relevant factors.
These three top-performing mutual funds offer a potent combination of growth potential and long-term opportunity. While this selection is somewhat aggressive, current trends suggest that this trio of top-performing mutual could deliver superior performance in 2024 and beyond.
Top Performing Mutual Funds: Vanguard Small Cap Index (VSCIX)
It’s hard to beat the low expense ratio and wide-ranging small-cap stock access that top-performing mutual fund Vanguard Small Cap Index (MUTF:VSCIX) offers. Rather than focusing on a select subset of small-caps, like S&P 500 or Russell 2000 mutual funds, VSCIX “tracks the CRSP US Small Cap Index, which sweeps in all small-cap US stocks that meet its investability criteria,” which include market cap and liquidity. Better yet, moving forward, small-caps may be the best market bet as mega-caps become increasingly overpriced.
The Nasdaq-100’s price-to-earnings ratio is currently 26, Furthermore, VSCIX boasts an average P/E ratio of about 17x, highlighting the inflated valuations of large-cap tech stocks. If market trends continue, we might see investors pulling back from mega-cap tech stocks. This will be especially true if there’s even moderate earnings fallout or negative news for top performers.
Small-cap stocks like those within the top-performing mutual fund remain undervalued and poised for a rebound. Using VSCIX to anchor a basket of top-performing mutual funds to buy and hold helps diversify a portfolio. You’ll also avoid significant overexposure while capturing small-cap stocks’ potential upside.
ARK Venture Fund (ARKVX)
Cathie Wood’s newly established ARK Venture Fund (MUTF:ARKVX) offers retail traders a chance at private equity and venture capital gains, though it’s currently only accessible through SoFi (NASDAQ:SOFI) or the Titan investment app. This fund opens up a range of investment opportunities typically unavailable to the average retail investor. It’s important to note, however, that investing in this fund comes at a higher cost compared to other mutual funds or ETFs. Presently, the fund’s net expense ratio is 2.90%, which means a $290 fee on a $10,000 investment. This rate includes a temporary expense reimbursement that is set to end in November, after which the total expense ratio will approach nearly 6%.
Despite the higher fees, the expense ratio may seem justifiable for growth-oriented retail investors, given the potential returns from Wood’s portfolio companies. Top investments include major names like SpaceX, OpenAI, and xAI (notice any trends?), with additional stakes in niche companies such as Replit, Discord, and Flexport alongside some of Cathie Wood’s favorite stocks like Tesla (NASDAQ:TSLA), Coinbase (NASDAQ:COIN) and Palantir (NYSE:PLTR).
Cathie Wood faced significant criticism post-ZIRP, not all of it without merit. However, the ARK Venture Fund plays to Wood’s strengths more than an actively traded ETF does. Unlike ETFs, shares in this fund can’t be sold impulsively but are only tradable during specific biannual windows. This structure promotes a long-term investment focus, aligning with Wood’s strategy and potentially benefiting investors by reducing the urge to adjust allocations or react to short-term market fluctuations constantly.
BlackRock Equity Dividend Fund (MADVX)
Finally, to balance out our riskier selections but still offer plenty of growth upside opportunity, the BlackRock Equity Dividend Fund (MUTF:MADVX) selects holdings from among top-name US with long-term potential while emphasizing dividend reliability and consistency. Holdings include household dividend stock names like Medtronic (NYSE:MDT), General Motors (NYSE:GM) and Wells Fargo (NYSE:WFC).
Thus far, MADVX lived up to the hype on both fronts: The top-performing mutual fund’s 1-year return is 20% and hit nearly 10% annually over the past decade. Its 30-day SEC yield is 2%, which, while not explosive, still nicely complements the top-performing mutual fund’s pricing performance. Better yet, the fund’s average stock beta is just 0.90, so it’s (relatively) stabler than wider markets while still capturing plenty of large-cap US stock upside.
Management takes a unique approach to stock picking within the top-performing mutual fund. Rather than emphasizing pure, total yield, the investment thesis demands “areas of the market that are poised for future dividend growth” and consequently, “[a] large portion of the fund is allocated to health care, financials and energy.” Those are three of the best sectors to bet on long-term, making MADVX a perfect pick to round out a top-performing mutual fund portfolio.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
