By Ian Salisbury
December 19, 2019
Illustration by Francesco Ciccolella

Picking the right mutual fund is an important financial decision. In the long run, thousands or even tens of thousands of dollars could be riding on your call. But just because it’s important doesn’t mean it needs to be complicated or stressful.

In fact, while there are plenty of mutual fund choices, chances are you need only a handful — or even just a single fund — to give yourself a well-rounded portfolio of stocks and bonds. And helping to guide you is precisely why we created our MONEY 50 list of Best Mutual Funds for 2020. So what makes a great mutual fund?

While there are plenty of investment strategies out there, our list focuses on what years of experience and research show really works: Holding a broad, diversified swath of the market, while keeping costs as low as possible. As a result, the core of our list are broad-based index funds from trusted providers like Vanguard and Charles Schwab. You could do very well to own only these.

Of course, we know some readers that’s not enough. They want the chance to beat the market — or at least enjoy the notion that someone is in charge of their money, making decisions. For that reason, we also include a selection of actively managed funds — ones that we are confident combine relatively low costs with strong track records that extend not just over three to five years but, ideally, over 10 or 15.

In other words, whatever your strategy, if you are building an investment portfolio, our list of mutual funds is a great place to start. (You can also find a companion list of the 50 Best ETFs for 2020 here.)

How to Use Our Best Mutual Funds List

Our list is broken out into three groupings of recommended mutual funds: “One-decision funds,” which are single funds offering you exposure to both equities and fixed income; “building-block funds” for the core of your portfolio, offering you broad exposure to stocks and bonds; and “custom funds” to help you tilt toward specific strategies, such as value or dividend investing. Here’s a roundup of what we consider the best mutual funds right now:

One-Decision Funds

Don’t want to put together a portfolio on your own? Then use one of these professionally managed funds that hold a diversified mix of stocks and bonds.

Building-Block Funds

These mutual funds expose you to broad swaths of the stock and bond markets, and should be used to construct the core part of your portfolio that you’ll hold for years. Because you’re simply seeking basic exposure, low-cost index funds are your best bet here.

Custom Funds

Supplement your core holdings with these funds to diversify more broadly and to tilt toward certain types of stocks and bonds.

NOTES: ¹Net prospectus expense ratios were used. ²Total return figures are as of Dec. 2. ³Five-year returns are annualized. ⁴Shares available only through fund company. ⁵4.25% sales load. *Admiral share class is newly created. Returns reflect institutional share class. N.A.: Not available or not applicable.

SOURCES: Fund companies

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