Top Mutual Funds for 2016 and Beyond

Photo: Alan O'Rourke,

A great way to build significant wealth over time is to carefully study individual stocks, identify and invest in the most promising ones at times when they're undervalued, and then hang on for many years, keeping up with their progress regularly. That's a tall order for most folks, though. Fortunately, another solid route to riches is long-term investing in top mutual funds, with talented fund managers doing the research and decision-making for us.

Accordingto the Investment Company Institute (ICI), there were more than 9,000 mutual funds out there as of the end of 2014. Which are the "top mutual funds," then? Well, of course, "top mutual funds" can be interpreted in many ways. For the purposes of this article, I used the Morningstar'sfund screening tool to find top international and domestic stock funds. For my criteria, I demanded managers with at least 10 years of tenure at the fund, a minimum initial purchase amount of no more than $3,000, no sales load, an expense ratio (annual fee) less than or equal to the category average, five- and 10-year returns greater than or equal to the category average, and a five-star rating from Morningstar. That won't guarantee stellar results, but it will certainly help us zero in on great contenders.

It's good to diversify your portfolio with some international holdings.

The screen I used helped me narrow down that huge field to about 35 domestic stock funds and about 18 international ones. From those I selected a handful that stood out in one way or another and that offered exposure to small, medium, and large companies as well as U.S. and foreign ones.

Top mutual fundsWithout further ado, below are five top mutual funds to consider investing in now or soon, with the aim of holding through 2016 and beyond. I've broken up some key information about them into two tables.


In the table above, you'll find two mutual funds that offer international exposure. Note that the Artisan International Value fund has a "foreign" focus, while the MFS Global Equity I fund is "global." Those might seem like the same thing, but among mutual funds, the term "foreign" (along with the term "international") will usually refer to a fund that invests mainly or completely in companies based outside the United States. A global fund will include those companies along with U.S.-based ones. Indeed, the MFS fund's topholding was recently Walt Disney, accounting for 3% of its assets.

The five-year average annual returns above are all impressive, but if the S&P 500 had surged 41% during that period, they would actually not be so impressive. Context matters. You can compare the domestic funds with the S&P 500, which averaged 14.09% during that period. The funds with a non-U.S. focus didn't do quite as well during the past five years, but they still handily beat their own benchmarks, which were around 7.5% to 8.5%.

A five-year return alone isn't enough to base a decision on, though. If you're intrigued by any of the funds above, dig into them more, looking up their prospectuses, reading what their managers say, and reviewing their recent holdings.

Be sure to read up on any fund you're considering. Photo: Benjwong, Wikimedia Commons.

A closer look at eachThe Artisan International Value fund features a low turnover rate, reflecting commitment to its holdings. Its annual fee is a bit above average, but the fund has been performing well enough to offset that in recent years. It recently had almost 15% of assets in cash, which is unproductive but also positions the fund to take advantage of opportunities that arise. 75% of its assets are non-U.S., while 10% are in U.S. stocks. Its top holdings are Compass Group PLCand ING Groep N.V.

The Fidelity Growth Company has an even lower turnover ratio, of 12%, and below average fees. It's close to fully invested, too, with little cash. Its top holding was Apple, followed by Salesforce.comand Google.

Glenmede Small Cap Equity has a 45% turnover ratio and below-average fees. It holds about 100 different companies, with more than a third of its assets in technology and consumer cyclical companies. Its top holdings were recently Maximus, a business services company, and mental health specialist Acadia Healthcare.

MFS Global Equity I has a very low turnover ratio of 11% and below-average fees. About 54% of its assets are in U.S. stocks, with about 45% in foreign ones. Top holdings recently were Disney, Reckitt Benckiser Group PLC, and Time Warner.

T. Rowe Price Mid-Cap Growth sports a turnover ratio of 27% and low fees. About 5% of its assets are in cash and more than a quarter of them are in industrial companies. Its top holdings recently were Fiserv and Pall.

Below are a few more details to consider about each of the funds.


For some people, even choosing among top mutual funds can be difficult. If that's the case for you, you have an even simpler alternative: invest in low-cost, broad-market index funds. (You might do that anyway, devoting just a portion of your portfolio to managed mutual funds such as the ones above.) Three solid contenders are the SPDR S&P 500 ETF, Vanguard Total Stock Market ETF, and Vanguard Total World Stock ETF.Respectively, they will distribute your assets across 80% of the U.S. market, the entire U.S. market, or just about all of the world's stock market.

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Longtime Fool specialistSelena Maranjian, whom you can follow on Twitter,owns shares of Apple, Google (A shares), Google (C shares), and Walt Disney. The Motley Fool owns and recommends Apple, Google (A shares), Google (C shares), and Walt Disney. The Motley Fool recommends Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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