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As the go-nowhere market of 2015 winds down, you're probably feeling disappointed by the returns of your fund portfolio. The typical core stock fund delivered double-digit returns for three years running, but was on track to close December flat for the year. Bond returns also stalled.
At times like these it's important to remember that staying the course is still a winning strategy. That's the guiding philosophy behind the Money 50, our list of the best mutual and exchange-traded funds (ETFs). We refuse to chase after chart-topping performers, which typically fizzle out. Instead, we favor Steady Eddie funds, which are more likely to give you solid returns over the long term. History shows that this approach is the surest way to reach your financial goals.
Since the Money 50 list is built to last, you can expect few changes from year to year. But this time around we made a major tweak: We added three tilted index ETFs, better known as smart-beta funds, which enable you to lean more heavily toward particular investing styles at a lower cost than hiring an active manager. To make room, we dropped three lagging actively managed funds.
Still, the Money 50 mostly remains the same. The core of our list is the building-block category—14 index funds or ETFs that mirror market benchmarks. These funds should make up the bulk, or all, of your portfolio. We also have a one-decision option, which provides broad diversification in a single fund. And we include a select group of active funds run by long-tenured managers. As always, all the funds are low cost, which gives you the best shot at the returns you need to meet your goals.
For help with some of the lingo, you'll find a glossary below the tables.
Herewith, the 50 best mutual and exchange-traded funds for 2016.
Building-Block Funds
These funds and ETFs, which offer you exposure to big chunks of both the U.S. and foreign stock and bond markets, should be used for the core part of your portfolio that you’ll hold for years. Because you’re seeking broad market exposure, low-cost diversified index funds are your best bet. |
| Specialty | Style | Ann. Expenses | Total Return in 2015 | 5 year Ann. Return | Min. Inital Investment |
| Vanguard REIT Index (VGSIX) | Real Estate | 0.26% | 0.1% | 11.7% | $3,000 |
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. |
| Bond | Style | Ann. Expenses | Total Return in 2015 | 5 year Ann. Return | Min. Inital Investment |
| Fidelity Balanced (FBALX) | Balanced | 0.56% | 2.2% | 9.7% | $2,500 |
| Fidelity Global Balanced (FGBLX) | Balanced | 0.99% | 0.0% | 5.0% | $2,500 |
| Vanguard Wellington (VWELX)4 | Balanced | 0.26% | 1.7% | 9.8% | $3,000 |
T. Rowe Price Retirement Funds Example: 2020 Fund (TRRBX)
62% stocks/38% bonds | Target Date | 0.66% | 1.3% | 7.9% | $2,500 |
Vanguard Target Retirement Example: 2035 Fund (VTTHX)
82% stocks/18% bonds | Target Date | 0.18% | 0.6% | 8.9% | $1,000 |
Custom Funds
Supplement your core holdings with these funds to tilt your portfolio toward certain kinds of stocks and bonds, diversify more broadly, or play a hunch. |
NOTES: 1. Net prospectus expense ratios were used. 2. Total return figures are as of Dec. 4, 2015. 3. Five-year returns are annualized. 4. Shares available only through fund company.5. 4.25% sales load. N.A.: Not available or not applicable. ETFs do not have a minimum initial investment. ETFs do not have a minimum initial investment. SOURCES: Lipper and fund companies
| Fund Glossary: How to Read the Tables |
| Large-Cap: Invests in shares of firms with stock market values, or market capitalizations, of $10 billion or more |
| Small-Cap and Midcap: Invest in smaller companies |
| Specialty: Invests in assets that don’t move in sync with the broad stock or bond market |
| Target Date: Provides exposure to a mix of stocks and bonds appropriate for your age—and gradually grows more conservative over time |
| Balanced: Offers you exposure to a mix of stocks and bonds, but doesn’t grow more conservative over time |
| Value: Looks for stocks that are selling at bargain prices |
| Growth: Focuses on companies with fast-growing earnings |
| Blend: Owns both growth-and value-oriented stocks |
| Short Term: Owns bonds that mature in about two years or less |
| Intermediate Term: Owns bonds that mature in two to 10 years |
| Multisector: Can buy foreign or domestic bonds of any maturity |
| Inflation-protected: Owns bonds whose value at least keeps pace with the consumer price index |
