We Don’t Hate ALL Mutual Funds: Here Are the Top Ten Best Performers – The Good Ones
There are about 8,000 mutual funds out there to choose from, and they’re multiplying. Every year more funds hit the market. Green Funds, Virtue Funds, Vice Funds, China Funds, Large Cap funds, Small Cap funds…any sort of specialty fund you can imagine is being offered. The catch is, about 80% of those funds underperform the market. Yeah, you read correctly, 80% do worse than the average return of the market.
Why is that though? Can those fund managers really be just poor stock pickers, or blind? No, that’s not it at all, it’s the fees. The fees that mutual funds charge eat into any returns you might otherwise get.
That’s why here at the Common Sense Investor, we’re usually all about stocks. We know that you don’t have to be a massively intelligent finance PhD to beat the market, anyone can do it. And statistically speaking, if you do your research well and pick your own stocks, you’ll usually do better than if you invest with a mutual fund. But we realize some people just don’t have the interest or the time to do the required research, and yet they still want to invest. For people like that, with minimal time and interest, we mostly recommend Index Funds. Index funds are just funds that match the return of the market, plus they’re passively-managed, so the fees are minimal. With an index fund, you’re guaranteed to beat 80% of all mutual funds, it’s that easy.
But there is a third type of person, someone who isn’t satisfied with market average returns, and still isn’t completely interested in building his own portfolio of stocks. This post, and the future ones like it are for people like that.
The Good Ones
Like we said earlier, 80% of all mutual funds underperform the market, but that leaves 20% out there that beat it, some of them by a substantial margin. The Good Ones is devoted to those funds.
First, here’s a list of the top ten best performing mutual funds of the past decade:
1. ING Russia (LETRX)
Annualized Rate of Return: 30.67%
2. Vanguard Precious Metals & Mining (VGPMX)
Annualized Rate of Return: 26.48%
3. CGM Focus (CGMFX)
Annualized Rate of Return: 26.34%
4. Jennison Natural Resources (PGNAX)
Annualized Rate of Return: 25.73%
5. BlackRock Global Resources (SSGRX)
Annualized Rate of Return: 25.90%
6. Matthews Korea (MAKOX)
Annualized Rate of Return: 25.73%
7. USAA Precious Metals & Minerals (USAGX)
Annualized Rate of Return: 24.88%
8. Turner Emerging Growth (TMCGX)
Annualized Rate of Return: 24.18%
9. U.S.Global Investors Global Resources (PSPFX)
Annualized Rate of Return: 23.50%
10. U.S.Global Accolade Eastern Europe (EUROX)
Annualized Rate of Return: 22.81%
Now, most of these funds are involved in commodities and resources, but that’s only a sign of the times, it doesn’t mean funds of the next ten years will necessarily be involved in the same sectors. Sectors, or what the funds are involved in, are really a moot point here. We’re interested in how these funds are run.
The average fund manager tenure for all US mutual funds is 3.9 years. That’s how long the average fund manager has been in his business. The average fund manager tenure for the top ten performing funds? 10.6 years. That’s a difference of almost 7 years. Seven more years of experience. Seven more years of mistakes and successes and time spent learning.
As for the fee structure, all ten of the best performing funds had lower than average fees, and seven of the 10 fund on the list did not charge loads (the up-front sales commission). So if you want to find good funds, you can start by looking for no-load funds with low fees and veteran managers and go from there. It’s just Common Sense.
Keep an eye on CSInvestor.com, as we’ll be updating our mutual fund section, The Good Ones, regularly with information on some of the top mutual funds and their managers.
