Kiplinger's Mutual Fund Guide For 2025

The S&P 500 Index hit a record high 57 times in 2024. All told, the index delivered a 25% return, capping off the benchmark's best two-year stretch in 25 years (in 2023, the S&P 500 gained 26%).

Three cuts in short-term interest rates helped fuel gains in the second half of the year. Trump's election victory kicked shares even higher, because it boosted investor expectations for tax cuts, deregulation and stimulative government spending, among other things, all of which are generally good for stocks.

As usual, large-company growth stocks turned in top returns this year, as artificial intelligence (AI) shares and the likes of Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META) and Nvidia (NVDA) still drove market gains – despite a less-frothy year than in 2023. Technology stocks weren't the best sector of the year; communications services stocks, a category that includes Meta and Alphabet, fared even better.

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Small and midsize U.S. stocks struggled to keep up. They turned in respectable, double-digit total returns but failed to beat large-company stocks. The Russell 2000, an index of small companies, returned 12%; the S&P MidCap 400 Index gained 14%.

Foreign stocks, however, appeared to be on their way to posting a breakout year – until they were hit by a late-summer rout that just wouldn't end. Over the first eight months of 2024, the MSCI EAFE Index, which tracks foreign stocks in developed countries, gained 12%. But anxiety about a slowdown in the U.S. (and softer growth in other parts of the rest of the world) in late summer sparked the sell-off in foreign shares; tariff fears weighed on certain international markets even more after the U.S. election. All told, the EAFE Index gained just 4% for the full calendar year.

Emerging market stocks fared better, climbing 7.5%. That's partly because China, which represents about one-third of the MSCI Emerging Markets Index, fared well, with a 19% gain. But Brazil and South Korea, two other big players in the benchmark, were down 30% and 23%, respectively.

How we compiled the Kiplinger mutual fund guide

Here, we show the top-performing stock mutual funds in 11 categories, using information from Morningstar, the financial data firm. In some cases,

Morningstar's classifications for certain funds may strike you as odd, and we've tried to correct or explain those instances as best we can. We only include funds with a minimum investment requirement of $10,000 or less; we cut funds that are only available to institutional investors, as well as funds that are only available to select advisory clients of specific investment management firms.

Most funds are available at major online brokers. Many charge an up-front sales fee, but in most cases you can purchase shares at a large online broker without paying a load or transaction fee.

A handful of funds on the list, however, are only available the old-fashioned way: directly from the fund company.

Finally, it's important to note that these lists are not meant to represent recommendations from Kiplinger. We present them to offer investors a tally of how certain broad categories of funds performed and to provide a starting point for you to perform your own research. All data is through December 31, unless otherwise noted. Funds marked with an asterisk are closed to new investors; those with a double asterisk are closed to all investors.

Large-cap stock mutual funds

Growth wins – again.

Fred Alger Management has been known for growth-stock investing for 60 years, and three Alger funds make the one-year winners list in this growth-led market. The funds share managers Patrick Kelly and Ankur Crawford; CEO Dan Chung comanages two of the three.

Usual suspects Microsoft (MSFT), Nvidia, Meta Platforms and Amazon.com top the funds' portfolios, but stock of software firm AppLovin (APP) really packed a punch, up 350% since it was added to the fund in April.

The Permanent Portfolio Aggressive Growth (PAGDX), with Nvidia and Palantir Technologies (PLTR) recently accounting for nearly 27% of assets, shone in 2023 and 2024, but it has landed in the bottom 25% of its subcategory (large-cap funds with a blend of growth and value traits) four times in the past eight years.

The Fidelity Blue Chip Growth (FBGRX), one of the Kiplinger 25, the list of our favorite no-load mutual funds, ranks more consistently in the top half of its peer group (large growth funds).

Mid-cap stock mutual funds

Landing a punch.

Kinetics Paradigm (WWNPX) and Kinetics Market Opportunities (KMKNX) make the top-10 lists in all four time periods, albeit with lofty expenses. Both funds hold an outsize stake (60%-plus) in Texas Pacific Land (TPL), one of the largest landowners in Texas, with extensive oil and gas royalties. The stock more than doubled in 2024 and has notched a 40% annualized gain over the past decade.

Ave Maria Value (AVEMX), on the three-year list, also counts Texas Pacific Land as a top holding. The fund screens out firms that support activities contrary to the core teachings of the Catholic Church. Two other funds that screen companies based on Christian views are One Rock (ONERX), on the one- and three-year winners lists, and Timothy Plan (TAAGX) on the five-year.

The T. Rowe Price Mid-Cap Value Fund (TRMCX), another three-year winner, has thrived since manager Vincent DeAugustino took the helm in mid 2022. The fund ranks in the top quartile of mid-cap value funds in each of the past three calendar years.

Small-cap mutual funds

Nice rally, but still trailing.

The Kinetics Small Cap Opportunities No Load Fund (KSCOX) tops the winners lists in all four time periods. Texas Pacific Land accounts for more than half the fund's $488 million portfolio. Comanaged by a long-tenured team, the fund comes with a pricey, 1.64% expense ratio.

Several other small-company funds (their official category despite a mid-cap tilt to some portfolios) are three-peat winners. Both of the Hennessy Cornerstone funds, Mid Cap 30 (HFMDX) and Growth (HFCGX), were all-in on industrials at last report, which accounted for more than 30% of assets – yet the only overlapping top-10 holding is Sprouts Farmers Market (SFM).

The Oberweis Micro-Cap (OBMCX) and Small-Cap Opportunities (OBSOX), five- and 10-year winners, seek to capitalize on market inefficiencies caused by a lag in investor response to new information. Micro-Cap ranks in the top 25% of small growth funds for six of the past 10 years; in the top half for seven. Opportunities makes the top half in five of 10 years.

Hybrid mutual funds

A mix of stocks and bonds.

Given the solid returns of both stocks and bonds in 2024, hybrid funds posted respectable returns last year.

Standouts include the target-date funds Fidelity Freedom Index 2065 (FFIJX), with a 90% stock portfolio, and Putnam Retirement Advantage 2065 (PCJZX), 95% stock.

Disciplined Growth Investors (DGIFX) lands in the three-, five- and 10-year tables. The moderately aggressive allocation fund holds 70% of its assets in stocks and 30% in bonds. Interested investors can buy shares directly from the fund company.

Kinetics Global (WWWEX) isn't your typical hybrid fund. Fund tracker Morningstar categorized it as a global small- and midsize-company stock fund for years before reclassifying it in 2022, presumably because of its sizable, 33% cash position. The rest of the fund holds stocks; Texas Pacific Land, which manages oil- and gas-rich property in West Texas, is a big holding. Focus your attention on other options if you seek a stock-bond mix.

Large-cap foreign stock mutual funds

An almost-good year.

Foreign developed markets rallied for much of 2024, only to give back a lot of their gains in the year's last quarter.

Pimco StocksPLUS International (USD-Hedged) (PIPAX) uses derivatives to track the dollar-hedged MSCI EAFE Index, but the fund enhances returns by running an actively managed bond portfolio alongside. The fund has outpaced its peers in nine of the past 11 calendar years. (Pimco A shares are available without a load or transaction fee at most online brokers.)

Marsico International Opportunities (MIOFX) has outpaced its peers in most calendar years over the past decade, too. But a big boost came from its 40% stake in U.S. stocks, including Nvidia, Spotify Technologies (SPOT) and Eli Lilly (LLY).

Some value-oriented funds made the grade: Carillon ClariVest International (EISAX) merits a mention. The fund's hefty fee is a negative, but the managers' focus on companies in the midst of an upswing in earnings growth has delivered impressive results.

Small- and mid-cap foreign stock mutual funds

Making the best of a blah market.

Smaller-company international stocks struggled, but these funds fared impressively well. Value-oriented fund Brandes International Small Cap Equity (BISAX) wins a spot on the one-, three-, five- and 10-year winners tables this year, but a year-by-year look shows performance tends to be less consistent than that record suggests. The fund charges a front-end load, but you can buy it load-free at E*Trade and Schwab.

Brown Capital Management International Small Company Fund (BCSVX), a member of the Kiplinger 25, is a one- and three-year winner. It favors small growth firms with a competitive advantage, a defensible position in their industry, durable revenue growth and able managers. Profitability – or a clear path to it – is a must, too.

Over three years, under new manager David Jenkins, Fidelity International Small Cap (FISMX) shines. So does the value-focused Oakmark International Small Cap (OAKEX), comanaged by mutual fund legend David Herro.

Global stock mutual funds

A world of opportunities.

Global funds invest all over the world, including the U.S., and are a one-stop option for investors seeking geographical diversification. But U.S. stocks have led foreign shares, so global funds with outsize stakes in American firms outpaced their peers; a focus on growth companies helped, too.

Fidelity Worldwide (FWWFX) holds 70% of its assets in U.S. stocks (the typical global stock fund holds 58%). Nvidia, Meta Platforms and Microsoft are top holdings.

Marsico Global (MGLBX) is a perennial winner, and it holds 62% of assets in U.S. shares. But unlike most global stock funds, it doesn't hold any emerging markets shares. Third Avenue Value (TVFVX), by contrast, holds only 21% of assets in U.S. stocks. The fund's hunt for value has taken it far afield from its early days as a U.S. value-oriented stock fund. Today, it focuses on small- to midsize-company foreign stocks, mostly in the U.K., Japan, Germany and Canada.

Diversified emerging market stock mutual funds

A good year – for a change.

China was less of a drag than in previous years. Stocks there climbed 19% in 2024, but markets in Brazil, Mexico and South Korea posted big losses, and the MSCI Emerging Markets Index gained just 7.5%.

Pzena Emerging Markets Value (PZVEX) focuses on deeply discounted shares, which can result in somewhat streaky returns as the managers wait for their investment thesis to play out. But investors in the fund over the past decade have been rewarded, relative to the returns of other emerging markets stock funds. Artisan Developing World (ARTYX) invests in 30 to 50 large, growing, financially sound firms that generate positive free cash flow (money left after investments and expenses to maintain and expand the business).

A word about the 10-year records of Matthews Emerging Markets Small Companies (MSMLX) and Fidelity Emerging Markets (FEMKX): Both funds sport newish managers who haven't been at the helm for the entire period.

Regional and single-country mutual funds

India, India, India.

India funds pepper every winner's table this year, beating out funds that focus on other areas – say, China, Japan or Europe.

Wasatch Emerging India (WAINX) holds 33 midsize- to large-company stocks, such as Bajaj Finance, a financial services firm, and Trent, a retail chain. Matthews Asia Innovators (MATFX) taps into fast-growing, innovative sectors in Asia outside of Japan. Its best-performing stocks over the past 12 months include Sea, a Singapore-based gaming and e-commerce concern, and Taiwan Semiconductor Manufacturing (TSM).

Japan's stock market hit an all-time high in 2024, and most strategists expect the good times to continue. Hennessy Japan Small Cap (HJPSX) allows investors to focus on the country's domestic growth. Its sibling, Hennessy Japan (HJPNX), is a winner over one year and 10 years. Though the fund delivered terrible returns in 2021 and 2022 compared with its peers, it seems to have regained its footing since.

Sector-specific mutual funds

Two words: tech and energy.

Technology and energy funds topped the returns for sector funds over the past one, three, five and 10 years. Holding shares in market leader Nvidia is a key reason tech funds make up four of 2024's top performers, as well as all of the winners for 10-year returns. The chip designer gained 171% in 2024 and an annualized 74.9% over the past decade.

Fund beneficiaries include Fidelity Select Semiconductor (FSELX) and the more broadly diversified Fidelity Select Technology (FSPTX). Energy-focused funds make up half of 2024's top 10 and all of the three-year winners.

Kinetics Spin-Off and Corporate Restructuring (LSHEX), despite a lofty 1.58% expense ratio, made the top-10 lists for one, three and five years. It has a 69% stake in Texas Pacific Land, a favorite in several Kinetics funds and a recent addition to the S&P 500 Index. The owner of oil and gas royalties and land gained 114% in 2024.

Alternative mutual funds

A hodgepodge of market hedges.

These funds offer investors ways to diversify beyond stocks and bonds. They employ a variety of strategies that make bets on commodity prices, currencies and futures, among other things. Bitcoin funds topped the one-year winners after the price of the digital currency topped $100,000 in late 2024.

Otter Creek Long/Short Opportunity (OTTRX) managers buy stocks they believe are undervalued and sell short stocks that are overvalued. Recent reports show the managers were bullish on Meta Platforms and bearish on Lowe's (LOW).

AQR Event Market Neutral (QMNNX) employs a similar strategy; it recently held shares in 3M (MMM) and Wendy's (WEN) and sold short stakes in Monster Beverage (MNST) and Alphabet.

Driehaus Event Driven (DEVDX) likes to invest in companies with a catalyst expected to drive results over the next 12 months, such as a merger, refinancing or reorganization. Top holding Cannae Holdings (CNNE), for instance, recently purchased a majority stake in the Watkins Company, a maker of spices and seasonings.

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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