Have you ever been interested in learning about mutual funds? A mutual fund is a portfolio of stocks, bonds, or other securities that is purchased by large funds managed by a professional fund manager. It's a trust that brings together investors with similar investment goals.

In this article, we have discussed the best-performing mutual funds for the year 2024 and shared some tips on how to pick the best ones. We've also covered average mutual fund returns and much more.

High Growth U.S. Equity Mutual Funds

To find the top-performing mutual funds based on their five-year returns, the given table focuses on US equity funds that are open to new investors and have low costs (expense ratios of 1% or less). Additionally, it only considers funds with minimum investment requirements of $3,000 or less.

Name5-year return (%)
Baron Durable Advantage Retail (BDAFX)19.04%
Amana Growth Investor (AMAGX)17.62%
AB Large Cap Growth Advisor (APGYX)17.00%
Payson Total Return (PBFDX)16.58%
Commerce Growth (CFGRX)16.48%
State Street US Core Equity Fund (SSAQX)16.45%
Buffalo Large Cap (BUFEX)16.16%

Definition Of Mutual Fund

Mutual funds are stocks, bonds, and other securities that are purchased by accumulating large amounts of investments. This provides individual investors with well-managed investments that align with their financial goals.

The fund is generally managed by a professional fund manager who makes investment decisions on behalf of investors. The returns and risks of mutual funds are allocated to investors based on their eligible investments. Therefore, this is a popular strategy for those who wish to invest in financial markets but prefer a more hands-on approach.

Things To Consider When Choosing The Best Mutual Funds

Every person wants the best mutual funds to invest in so while choosing the best mutual funds there are a few things you should consider and they are mentioned below:

  • The first and foremost step is to have the best objective regarding investment. You should think about your financial goals and the purpose of your investment whether you are looking for long-term growth, regular income, or a balanced approach.
  • Some mutual funds are more conservative, while others may be aggressive so, assess your comfort level with risk. Choose one that matches your risk tolerance.
  • After this, you can look at the historical performance of the mutual fund. Check the performance of it over different market cycles and you can also compare it with other similar funds.
  • Consider the costs associated with the mutual fund and make sure they are reasonable.
  • You may also check the experience and track record of the fund manager.
  • Consider the level of diversification within the mutual fund. A well-diversified fund can help reduce risk by spreading investments across different asset classes.
  • Take note of the fund's size. While larger funds may offer stability, smaller funds may have greater flexibility in making investment decisions. 
  • Consider the expense ratio of the mutual fund. Lower expenses can potentially lead to higher returns over the long term.

Average Mutual Fund Return

As the name suggests, this return is measured over 1 year and expressed as an annual percentage weighted in time. In the simplest sense, the annual return is the benefit or loss of your initial investment in the mutual fund for one year.

However, there are two main ways to calculate this average mutual fund return and they are:

i. Simple Average Return

The simple average return is calculated using an average of each security's return. It is easier to calculate but less accurate due to neglecting compounding.

ii. Compound Annual Growth Rate

This method considers the compounding effect and provides a more accurate picture of the average annual growth of the investment. However, it is important to know the beginning and ending NAV of the fund.

Fees Of Mutual Fund

Before investing in mutual funds, it’s important to know the fees involved. These costs can have a significant impact on how much money you will get from your investments over the long term. Some of the common mutual fund fees are mentioned below:

1. Expenses Ratio:

The fee is measured as a percentage of the amount you have invested in your fund. This is an annual fee to cover the operating costs of the fund, which includes administration fees, administrative fees, and marketing-related expenses. 

2. Redemption Fees:

A redemption fee is charged to an investor when shares are sold from a fund. These fees are typically a percentage of the amount you're redeeming, and they vary from fund to fund.

3. Sales Charges or Loads:

This fee is charged when you buy or sell mutual fund shares. There are two types of sales loads: front loads, which are paid to you when you buy shares, and back loads, which are charged when you sell shares.

4. Account Fees:

Some mutual funds may charge account maintenance fees or accounting service fees. This fee covers the cost of maintaining your account and can be charged annually or quarterly.

Can You Experience Losses With Mutual Funds?

Yes, it is possible to experience losses with mutual funds. The value of mutual fund investments can fluctuate based on the performance of the underlying securities held by the fund.

If the securities in the fund decrease in value, the net asset value of the fund can also decrease, resulting in a loss for investors. It’s important to remember that mutual funds carry financial risk, and past performance doesn’t predict future results.

Therefore, it is important to carefully consider your investment goals and risk tolerance before investing in mutual funds. But, if you put your money into mutual funds that are well-diversified and you plan to keep your investment for a long time, you'll probably see your money grow due to compound interest.

Mutual Funds: In Conclusion

When it comes to investing in mutual funds, it is important to know how the fund has performed over time. Instead of focusing only on past performance or short-term profitability, consider the consistency of profitability over the years. This will give you a better understanding of how the fund has performed over time.

Now if you are considering switching from one stock to another based solely on past performance, this may not be the best option, especially when it comes to mutual funds. Instead, you can build a smart and diversified investment portfolio by carefully selecting a few funds that align with your goals. You can reduce risk by spreading your investment portfolio.

Remember to review your investments regularly and make adjustments as needed, at least once a year. This ensures that your portfolio stays on track with your investment goals and captures any changes in the market.

In conclusion, mutual funds are a great way to build a diversified portfolio. They allow you to invest in different companies, which helps spread your risk. Just remember to focus on long-term performance rather than short-term profits.

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