It can sometimes seem like there’s an endless number of mutual funds for you to invest in. But not all of them are a right fit for your portfolio—and some aren’t worthy investments at all.
Why it matters: A popular feature from Morningstar’s FundInvestor newsletter greatly shrinks the list and can help you home in on the winners. Russ Kinnel is the newsletter editor and senior principal of ratings for Morningstar Research Services. And he’s here to brag about his thrilling funds list.
11 Questions on Morningstar’s Thrilling Funds List
- Let’s begin with the idea behind the thrilling funds list. How did this get started, and what’s the mission?
- You start with thousands of fund share classes. How do you narrow the list to a few dozen, and what are you looking for?
- Thirty-three funds met your high standards and made the cut, and they’re all repeats. Did that surprise you?
- What kept some funds off this year’s list?
- A select group of these standouts are making big bets. Let’s start with the only thrilling fund from the diversified emerging-markets category.
- A trio of foreign large growth funds from Fidelity are focusing heavily on financials and industrials. What’s their story, and what makes each of these unique?
- Can you describe the funds that are wagering big time on the tech sector?
- The healthcare sector has struggled this year. But some funds from Vanguard, Fidelity, and Dodge & Cox appear ready to benefit from a rebound, right? Talk about those funds.
- Where should fixed-income investors look if they’re tweaking that side of their portfolio?
- Which income and dividend-focused funds are outshining their category peers?
- And finally, how can the audience test the funds in their portfolio against your thrilling list?
Key Quote on How to Screen for Top Mutual Funds
The real idea is, let’s focus on the things that are the best predictors that really matter the most for funds. So you could arrive at a screen and find your funds by doing a lot of screens.
But what I think is more important is instead to just limit it to just a few, and when you do that, that allows you to really raise the bar. We’re just going to screen on a few things, but we’re going to be very demanding.
Russel Kinnel, senior principal, ratings, Morningstar Research Services
The Takeaway: Focusing on a few key metrics can help investors narrow down thousands of mutual funds into a tight list of quality fund picks. Kinnel proves that it pays to be “picky” as a fund investor, focusing his “Thrilling Funds” list on a fund’s fundamentals. The list bars funds with high fees and risky bets and instead includes Morningstar Medalists from Vanguard, Fidelity, and more. Kinnel identifies 33 funds on his “Thrilling Funds” list, and we’re highlighting the 16 of the names that are making big bets.
Thrilling Funds Picks List
- Seafarer Overseas Growth and Income SIGIX
- Fidelity Diversified International FDIVX
- Fidelity International Discovery FIGRX
- Fidelity Overseas FOSFX
- American Funds New Economy ANEFX
- Fidelity Contrafund FCNTX
- Vanguard Primecap VPMAX
- Vanguard Primecap VPCCX
- Dodge & Cox Stock DODGX
- Baird Core Plus Bond BCOIX
- Dodge & Cox Income DODIX
- American Funds American Mutual AMRMX
- American Funds Income Fund of America AMECX
- Vanguard Wellesley Income Admiral VWIAX
- Fidelity Select Health Care FSPHX
- Vanguard Wellington Admiral VWENX
More From Morningstar on How to Find Top Morningstar Medalist Funds
How can investors screen for funds on their own? Kinnel says that “to find good results, you need to go with fundamentals that endure and have predictive power.” And what are those fundamentals? Kinnel says fees are up first. Then, check for the Morningstar Medalist Rating. Read How Smart People Screen for Funds for the full list of how the FundInvestor editor picks top funds.
And while on the subject, Kinnel is asking investors to please stop screening for funds this way. Kinnel warns that investors should not bank on short-term returns and big yields. Sticking with fundamentals will keep you and your portfolio away from the valley of short-term success. If you’re looking for new funds to put to the test, David Carey names 4 New Funds on Our Radar.
With what feels like never-ending market volatility, Kinnel has found 10 funds that reduce your portfolio’s risk. Investors may be wondering why certain investments hold up over time as investing conditions become more unpredictable. Daniel Sotiroff breaks down the methods behind long-term investment success.
Jess Bebel, an associate multimedia editor at Morningstar, contributed to this article.