The Best of the Big Funds
The 20 biggest no-load stock funds -- should you buy, sell or hold?
In the mutual fund arena, it's hard to claim that bigger is better. Too many funds lose a bit of flexibility and agility as they put on weight. Yet tens of millions of Americans have part of their wealth tied up in these heavyweights, and money continues to pour into them.
So we thought it was time to take a hard look at the 20 biggest no-load stock funds to separate the true champs from the tired also-rans. We include balanced funds, index funds and funds that have closed their doors to new investors, because even shuttered funds are open to existing customers (but we excluded one index fund that required a $100,000 initial investment).
Row 0 - Cell 0 | Expanded Analysis of the Funds |
Row 1 - Cell 0 | Update of Our Favorite Mutual Funds |
Row 2 - Cell 0 | Latest Stock Coverage |
As you'll see, some of the behemoths have managed their weight gain gracefully. Others have simply become bloated and seemingly lost their way. But there are no truly awful funds among the 20 biggest; we suggest selling only one of them. We divide the funds into four groups and list them, within each category, by size.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Domestic funds
For sheer continuity of management, it's hard to beat T. Rowe Price Equity Income. Brian Rogers has skippered the fund since its launch in 1985. Much like Fidelity Equity-Income, it focuses on large, dividend-paying companies. Since its inception, Equity Income has returned an impressive 13% annualized.
Rogers looks for companies, often out of favor, with relatively low price-earnings ratios and high yields. "Undervaluation and dividend focus keep you out of trouble in difficult market environments," he says, explaining why his fund held up so well in the disastrous 2000Ð02 market, during which it lost just 9%. Recent additions to the fund include Eli Lilly and HR Block. T. Rowe Price Equity Income, a member of the Kiplinger 25, is a BUY.
Since its birth in 2001, Dodge Cox International Stock has grown up quickly. It's easy to see why. Annualized returns of 20% over the past five years comfortably land International in the top 10% of diversified foreign stock funds.
Another triumph of the Dodge Cox way, International is run on the same principles as its domestic sibling. In fact, the same analysts initiate investment ideas, and four members of the committee that runs International are also on the panel in charge of Stock. If you need to increase your allocation to foreign stocks, BUY this fund while it's still open.
Is bloat catching up with Fidelity Diversified International? Since shutting to new clients in October 2004, assets have ballooned from $18 billion to $46 billion. But after outpacing the average diversified overseas fund for 13 straight years, Diversified International lagged its average rival by two percentage points in the first 11 months of 2006.
Manager Bill Bower says asset growth isn't responsible for the lackluster '06. Instead, he blames the sluggish performance on his decision to cut back -- prematurely, as it turned out -- on his holdings of emerging-markets stocks. Bower spreads his portfolio across more than 350 stocks -- mostly large companies in developed countries. He doesn't make big-picture judgments on countries or their sectors. "Instead of making industry or geographic bets, I want to own the best stock in a given industry in every part of the world," says Bower, who has led the fund since 2001. The fund's size and performance slowdown are worrisome. We rate the fund a HOLD for current clients.
[page break]
Balanced funds
Talk about venerability. Vanguard Wellington, the oldest and largest balanced fund, has been around since 1929. Manager Edward Bousa says Wellington, which keeps about 65% of assets in stocks (most of them dividend payers), and the rest in bonds and cash, suits "people who want to buy and hold a fund forever. Consistency is the hallmark." This fund has returned 9% annualized over the past decade, outpacing the typical balanced fund by an average of three percentage points per year. Balanced funds as a matter of policy hold both stocks and bonds.
Bousa studies global supply-and-demand imbalances in industries when picking stocks (John Keogh runs the bond allocation). For example, robust demand for oil by China and India pointed him in the direction of such stocks as ExxonMobil and ConocoPhillips. Today, strong demand for farm products leads him to Deere and Syngenta, a Swiss seed-technology outfit. Wellington yields 2.9% and is a BUY for investors seeking a fund with a third of its assets devoted to bonds.
Borrowing liberally from its siblings, Dodge Cox Balanced invests in stocks that are held by Dodge Cox Stock, and managers borrow bond ideas from Dodge Cox Income, a bond fund. Balanced, which is closed, has returned 12% annualized over the past 20 years and lost money in only one of those years (down 3% in 2002).
Unlike most money managers, the same in-house research analysts, divided up by industry, analyze both stocks and fixed-income investments. In fact, there's considerable overlap between the corporate bond and stock names in Balanced. "If we have a very positive outlook for the long-term growth and success of a company, it makes us interested in buying the bond," says Charles Pohl, co-director of research. If you currently hold Balanced and are comfortable with the allocation, feel free to BUY more.
Call Fidelity Puritan Equity-Income lite. The 60% or so of Puritan's assets in stocks, mostly blue chips with above-average yields, are virtually identical to those in Fidelity Equity-Income. That shouldn't come as a surprise because Stephen Petersen, Equity-Income's manager, runs Puritan's stock portfolio (George Fischer runs the fund's bond portion).
Puritan has outpaced the average balanced fund in nine of the past 11 years, although it has lagged Dodge Cox Balanced, Vanguard Wellington and Fidelity Balanced over the long term. That might be because of a slightly lower allocation to stocks than its big rivals. Still, its focus on large companies means Puritan should thrive when those kinds of stocks rebound. Investors who like by-the-book balanced funds may BUY more shares.
Lawrence Rakers says Fidelity Balanced is a fund for "hungry widows and orphans." By that, he means Balanced is a bit more aggressive than many of its peers. Its allocation to stocks is sometimes as high as 70%, and he's more willing than the typical balanced-fund manager to invest in small and midsize companies. As a result, Balanced has been in the top 10% of its category over the past five years but has also been 28% more volatile than the typical balanced fund.Rakers, who chooses the stocks and sets the fund's overall allocation (while George Fischer, once again, selects the bonds), freely credits the Fidelity machine for his success. "My whole process is to extract value from Fidelity research," says Rakers. Each day he scans an internal newspaper that contains one-page company reports compiled by the 90 stock analysts in Fidelity's Boston headquarters. BUY Balanced if you want a fund with a mix of stocks and bonds and you're willing to accept a slightly higher level of risk than that of the typical balanced fund.
Key numbers: The scoop on the 20 largest no-load stock funds
Most funds on this list have solid records. Of the 15 actively managed U.S. stock and balanced funds, only three trailed the SP 500 over the past ten years. The only fund we suggest selling is Fidelity Blue Chip Growth.
FUND | SYMBOL | ASSETS (IN BILLIONS)* | 1 YR RETURN | 5-YR ANNUALIZED RETURN | 10-YR ANNUALIZED RETURN | EXPENSE RATIO |
Vanguard 500 Index Inv | VFINX | $115.7 | 14.1% | 6.0% | 8.0% | 0.18% |
Vanguard Total Stock Market Index Inv | VTSMX | 81.0 | 14.4 | 7.6 | 8.3 | 0.19 |
Fidelity Contrafund** | FCNTX | 68.8 | 13.0 | 12.0 | 10.9 | 0.90 |
Dodge & Cox Stock** | DODGX | 61.0 | 17.9 | 13.0 | 13.8 | 0.52 |
Vanguard Windsor II Inv | VWNFX | 46.7 | 15.8 | 10.1 | 9.8 | 0.35 |
Fidelity Magellan** | FMAGX | 46.0 | 9.9 | 3.5 | 6.8 | 0.59 |
Fidelity Diversified International** | FDIVX | 45.8 | 25.7 | 17.0 | 12.9 | 1.06 |
Vangaurd Wellington Inv | VWELX | 44.3 | 14.7 | 8.9 | 9.4 | 0.29 |
Fidelity Low-Priced Stock** | FLPSX | 38.8 | 17.7 | 16.4 | 15.5 | 0.88 |
Vanguard Primecap Inv** | VPMCX | 31.1 | 15.1 | 9.0 | 12.6 | 0.46 |
Fidelity Growth & Income | FGRIX | 30.5 | 10.1 | 4.1 | 7.0 | 0.69 |
Fidelity Growth Company** | FDGRX | 30.1 | 11.6 | 5.7 | 9.2 | 0.97 |
Fidelity Equity-Income | FEQIX | 29.9 | 18.0 | 8.7 | 9.0 | 0.68 |
Dodge & Cox Balanced** | DODBX | 26.0 | 13.7 | 10.7 | 11.5 | 0.53 |
Fidelity Puritan | FPURX | 25.5 | 14.0 | 8.0 | 8.4 | 0.63 |
Dodge & Cox International Stock | DODFX | 24.6 | 28.2 | 20.5 | - | 0.67 |
T. Rowe Price Equity-Income | PRFDX | 22.7 | 16.9 | 9.3 | 9.9 | 0.71 |
Fidelity Balanced | FBALX | 22.2 | 13.5 | 10.3 | 10.7 | 0.64 |
Fidelity Blue Chip Growth | FBGRX | 20.4 | 5.5 | 1.7 | 5.3 | 0.63 |
Vanguard Total Intl Stock Index | VGTSX | 18.2 | 29.2 | 15.7 | 7.3 | 0.31 |
SP 500-STOCK INDEX | Row 21 - Cell 1 | Row 21 - Cell 2 | 14.2% | 6.1% | 8.1% | Row 21 - Cell 6 |
MSCI EAFE INDEX | Row 22 - Cell 1 | Row 22 - Cell 2 | 27.6% | 14.8% | 7.6% | Row 22 - Cell 6 |
Data to December 1. *Includes all share classes. **Closed to new investors. -Not applicable. Source: Standard & Poor's.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
10 Unbeatable Destinations For A 2025 Shoulder Season Vacation
Lighter crowds, lower prices and mild weather are attractive reasons to travel off-peak.
By Emma Patch Published
-
Top 10 Myths About 1031 Exchanges, Debunked
Are you confused about 1031 exchanges? This brief guide busts the top myths about real estate's favorite tax-deferral strategy.
By Daniel Goodwin Published
-
Best Banks for High-Net-Worth Clients 2024
wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
By Lisa Gerstner Last updated
-
Stock Market Holidays in 2024 and 2025: NYSE, NASDAQ and Wall Street Holidays
Markets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024 and 2025.
By Kyle Woodley Last updated
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?
Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
By Michael DeSenne Last updated
-
Bogleheads Stay the Course
Bears and market volatility don’t scare these die-hard Vanguard investors.
By Kim Clark Published
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.
Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
By David Muhlbaum Last updated
-
What Are I-Bonds? Inflation Made Them Popular. What Now?
savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
By Lisa Gerstner Last updated
-
This New Sustainable ETF’s Pitch? Give Back Profits.
investing Newday’s ETF partners with UNICEF and other groups.
By Ellen Kennedy Published
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck Published