Editor’s note: With the markets offering up a seemingly endless parade of surprises, investors are looking for mutual-fund managers who can handle anything thrown at them. In this special report, SmartMoney focuses on funds run by managers who have successfully navigated years worth of market euphoria and panic - and helped keep investors ahead. We highlight funds that specialize in five categories: large company stocks, foreign stocks, global investments, balanced investments and real estate.
For better or for worse, millions of Americans have staked their financial future on mutual funds, socking away their savings in everything from 401(k) plans to Roth IRAs. Now, five years into one of the industry’s toughest periods, they are coming away with a valuable lesson: Instead of picking just any fund, investors need some criteria for finding the strongest and savviest fund managers. Over the past few years, fund managers have had to figure out how to take advantage of or simply dodge some of Wall Street’s wildest swings. “When you talk to managers and see how they made changes quarter to quarter, year over year, you can see which ones played the game really well,” says Dave Hintz, head of U.S. equities for Russell Investments, a firm that analyzes mutual fund performance.
Market watchers say that if the past few years have taught us anything, it’s that many managers can’t handle extreme market environments. And very few funds returned much more than investors would have earned by simply holding a broad stock market index. In a recent study, business professors Eugene Fama and Kenneth French found that from 1984 to 2006, even most funds that notched gains didn’t earn enough to justify their fees. So, many experts say that when a mutual fund provides world-beating returns over time, investors should take notice. “You become worth your salt when markets go down,” says Michael D. Cohn, chief investment officer of the Global Arena Investment Management, a financial-planning firm.
Each year, SmartMoney compiles a list of the best of the best in the $11 trillion fund industry. We’ve highlighted as few as five and as many as 100. This year we used a fund’s five-year track record as the primary hurdle. That time frame shows how managers have dealt with all the financial gyrations since 2005. We also wanted funds that most can afford to buy (no $1 million minimum investments) and that aren’t too expensive to own (no big load or management fees). Using data from Morningstar, we identified 15 of the best mutual funds. Most hold at least some U.S. stocks, but many own more-exotic assets such as bonds that fund schools in Texas. Whatever they buy, the managers of these funds have done well for investors in trying times.
15 Award-Winning Funds
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