• Print
  • Default text size A
  • Larger text size A
  • Largest text size A

10 open-end mutual funds to buy now

Average ETF portfolio lags average mutual fund portfolio.

  • By Mark Hulbert,
  • MarketWatch
  • – 02/12/2014
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.

Call it the revenge of open-end mutual funds: The typical investment advisor makes more money for his clients with them than with exchange-traded funds (ETFs).

And that's a big surprise.

Given the much-vaunted advantages that ETFs have over traditional funds, I would have thought just the opposite would have been the case. For example, ETFs can be bought or sold any time of day as opposed to just once a day for most open-end funds. And ETFs typically have much lower fees: Not just lower expense ratios, but also no loads (either front-end or back-end), as well as no redemption fees.

But these undeniable advantages aren't translating into making more money in the real world. According to performance data from the Hulbert Financial Digest, advisers' model portfolios of traditional mutual funds are producing a greater profit, on average, than those same advisers' model portfolios of ETFs.

Note carefully that these results emerge from just those advisers on the HFD's monitored list who maintain model portfolios of both types of funds. That is, these advisers have one or more model portfolios that only invest in ETFs, and in addition have one or more other model portfolios investing only in open-end mutual funds.

By focusing on just these advisers' portfolios, I can zero in on the unique impact of ETFs. That's because the same market timing judgments, industry and sector bets, and so forth, are behind these various portfolios. So exchange-traded funds' many advantages ought to be showing up in superior performance in these advisers' portfolios of ETFs.

But they're not.

Why? I can only speculate, but my best guess is that ETFs' advantages are encouraging counterproductive behavior. Their low cost, coupled with the ability to get into and out of them at any time during the day, as well as the ability to sell them short, have seduced advisers into trading too often.

Regardless of the reason, the pattern emerging from the HFD data is persistent. I first noted it in a column from early 2006, eight years ago. Because it has not reversed itself since then, we can be more confident that it is real.

With that thought in mind, I list below the 10 open-end mutual funds that currently are most popular among those HFD-monitored advisers who have beaten a buy-and-hold in the stock market over the last 15 years. They are listed in descending order of popularity:

  • Fidelity Floating Rate High Income (FFRHX)
  • Vanguard Short-Term Investment Grade (VFSTX)
  • Vanguard Dividend Growth (VDIGX)
  • Fidelity Blue Chip Growth (FBGRX)
  • Fidelity High Income (SPHIX)
  • Fidelity OTC (FOCPX)
  • Osterweis Strategic Income (OSTIX)
  • Vanguard Intermediate Term Bond (VFICX)
  • Vanguard Total Stock Market Index (VTSMX)
  • Vanguard Wellington Income Fund (VWELX)

Notice that five of these 10 popular funds are bond funds, including the two most popular.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
Copyright © 2014 Dow Jones & Company, Inc. All Rights Reserved.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.

Links provided by Fidelity Brokerage Services

fidelity-fbs-iconThese links are provided by Fidelity Brokerage Services LLC ("FBS") for educational and informational purposes only. FBS is responsible for the information contained in the links. FICS and FBS are seperate but affiliated companies and FICS is not involved in the preparation or selection of these links, nor does it explicitly or implicitly endorse or approve information contained in the links.

Published by Fidelity Interactive Content Services

Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.
Content for this page, unless otherwise indicated with a Fidelity pyramid logo, is published or selected by Fidelity Interactive Content Services LLC ("FICS"), a Fidelity company with main offices in New York, New York. All Web pages that are published by FICS will contain this legend. FICS was established to present users with objective news, information, data and guidance on personal finance topics drawn from a diverse collection of sources including affiliated and non-affiliated financial services publications and FICS-created content. Content selected and published by FICS drawn from affiliated Fidelity companies is labeled as such. FICS selected content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by any Fidelity entity or any third-party. Quotes are delayed unless otherwise noted. FICS is owned by FMR LLC and is an affiliate of Fidelity Brokerage Services LLC. Terms of use for Third-Party Content and Research.
fidelity-fbs-iconThese links are provided by Fidelity Brokerage Services LLC ("FBS") for educational and informational purposes only. FBS is responsible for the information contained in the links. FICS and FBS are seperate but affiliated companies and FICS is not involved in the preparation or selection of these links, nor does it explicitly or implicitly endorse or approve information contained in the links.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.