You’ve probably heard the “wisdom” on mutual funds a million times.
It goes like this: mutual funds collect high fees and most still fail to beat the market, so why bother when you can buy a low-cost index fund, like the SPDR S&P 500 ETF (SPY) or the Vanguard 500 ETF (VOO), and tag along with the market’s performance?
To be fair, it hasn’t been a bad strategy. Look at the total return those funds have posted over the last five years:
Indexing Has Paid Off—But We Can Do Better
Nearly doubling your money in half a decade is nice—but does that really mean mutual funds are ready for the dustbin of history?
No way.
Because while it’s true that a lot of mutual funds have done poorly due to high fees, sloppy management and bad investments, there are plenty out there that have earned their fees, crushing these index funds for years—and they’re still far outperforming the market. (Click here for my latest take on when it’s okay to pay higher fund fees—and when it’s not.)
Here are three unloved mutual funds that are doing just that.
A Global Tech Winner
Columbia Global Technology Growth R4 (CTYRX) is a fund most people have never heard of, but it has a lot going for it. With a modest 1.09% expense ratio, it boasts lower fees than many tech mutual funds, despite the fact that it’s one of the smallest mutual funds on the market, with just $818 million in assets under management.
Rahul Narang, the fund’s portfolio manager, is also an unknown to most folks.
That’s a shame, because Narang has steered the fund to a sparkling performance that’s clobbered the S&P 500 and a dominant tech-focused ETF: the PowerShares QQQ ETF (QQQ):
Obscure Fund Laps the Competition
If you think Columbia delivers those returns with a bunch of high-risk investments, think again. Unlike some other mutual funds, which destroy your capital with risky bets on small-cap firms you’ve never heard of, Columbia’s Global Tech fund holds large cap firms with reliable cash flows such as Apple (AAPL), Alphabet (GOOG) and Facebook (FB).
And it’s still crushing the market by a huge margin. That definitely makes it worth a look now. (An aside: I just recommended another unusual fund that lets you buy blue chips like these—including shares of Warren Buffett’s Berkshire Hathaway—at a 17% discount. Click here to read all about it.):
A Health Care Fund That Tripled Investors’ Money
If you want to diversify beyond tech, consider the ProFunds UltraSector Health Care Fund (HCPIX), which is up 195% in the last five years, thanks to management’s knack for selecting the right investments at the right time.
Not only is that more than double what SPY and VOO have delivered, it’s also a lot higher than the health care index fund, the Health Care Select Sector SPDR (XLV):
Crushing the Market by a Mile
Keep in mind that this is a specialty fund, so the fees are a little higher than you’d expect—1.53%, which I’m fine paying considering the fund’s returns are more than double those of the broader market.
Plus, HCPIX actually has a conservative portfolio strategy despite the massive returns—the fund’s top holdings are Johnson & Johnson (JNJ), Pfizer (PFE), Merck & Co (MRK) and UnitedHealth Group (UNH). These are all large cap stocks with tremendous dividend history and financial responsibility, but HCPIX is turning those picks into market-busting returns.
Again, the indexers have had a good five years, but this mutual fund did much, much better. Why settle for an index fund when a bit more research can fetch you returns like these?
Diversified and Superior
If you want a fund that’s diversified across asset classes and still beats SPY and VOO, there are plenty to choose from. For instance, there’s the JPMorgan Growth Advantage Fund (JGVRX), which is up 112.8% in the last five years, a lot more than the index funds:
Another Fund Proves the Naysayers Wrong
Again, don’t worry that JPMorgan is delivering these returns with an aggressive strategy focused on small-cap stocks that are here today and gone tomorrow. This fund’s biggest holdings include Google, Apple, Facebook and Amazon (AMZN).
Oh, and it’s not relying too heavily on tech, either: over half of the fund is dedicated to other sectors, from industrials to consumer staples to utilities, such as Waste Connections (WCN), Visa (V), Stanley Black & Decker (SWK) and Lennox International (LEN).
One of the other really nice things about this fund is that it’s really cheap. Its expense ratio is just 0.85%, which is incredible considering it’s been beating the market for years. Those fund managers are definitely earning their keep.
Crush the Market and Pocket a 7.4% Dividend Too!
These are all great funds, but they’re not on my personal buy list right now for one reason: they pay zero dividends!
And steady CASH payouts are just too important to ignore, especially when it comes to saving for—and living in—retirement.
Which is why I recommend 4 other funds that are throwing off a fat 7.4% average dividend yield now!
You read that right: a payout nearly 4 TIMES what the millions of folks sitting on SPY or VOO have to settle for. Even better, all 4 of these income titans are trading at ridiculous discounts to their net asset value.
I won’t get into the weeds here, but here’s what that means for you and me: if the market takes a tumble, these funds’ steep discounts throw a nice floor under their share prices—and we’ll still collect 7.4% in CASH!
But I expect we’ll do far better than that: my team’s latest analysis points to massive 20%+ price upside in the next 12 months, on top of that gaudy 7.4% payout!
For a limited time, I’m willing to give you full access to ALL of my research on these powerhouse funds with no obligation whatsoever. Simply CLICK HERE to discover their names, tickers, buy-under prices and everything you need to know before you buy.
Recent Comments