What a difference a year makes: After the terrible returns of 2022, stocks the world over gained solid ground in 2023, as a much-anticipated recession never arrived and economic growth, though tepid, came in stronger than expected. A calmer inflation rate helped, too.
Indeed, it was a year of reversals. U.S. stocks, for instance, rebounded and entered bull-market territory. The S&P 500 Index hit record highs in late 2023 and finished the year up 26%. Of course, those gains were largely driven by a handful of U.S. mega-cap stocks. We're talking about the Magnificent 7 stocks – namely Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) – which logged an average gain of 112% in 2023. Nvidia more than tripled in value; Meta nearly tripled.
Clearly, funds that invested in those companies fared the best last year. But with the Magnificent 7 sporting an average market value of $1.7 trillion, that meant small- and midsize company stock funds were left behind – but not too far behind. In fact, small and mid-cap stocks finished 2023 strong. The Russell 2000, an index of small companies, returned 17%; the S&P MidCap 400 index gained 16%.
The Mag 7 had a ripple effect in U.S. stock sectors, too. The sector losers of 2022 – communications services, information technology and consumer discretionary – became 2023's winners. And the winning sectors of 2022 – energy, consumer staples and healthcare – largely brought up the rear in 2023.
International stocks came back as well. Shares in developed countries, as measured by the MSCI EAFE Index, gained 18%, lifted in large part by big gains in Nordic countries – Denmark gained 31%; Sweden was up 24% – as well as in Italy, Spain and Ireland.
Emerging market stocks also did well. China, which makes up 28% of the index, was a drag, as an anticipated economic recovery has been slow to arrive; stocks there fell 11%. But other big market components of the benchmark index, including Taiwan, India, South Korea and Brazil, were up sharply. The MSCI Emerging Markets Index posted a positive 10% return for the year.
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 that determines the categories into which the funds are sorted. In some cases, the classifications of certain funds may strike you as odd, and we have tried to correct or explain those instances as best we can.
The list only includes funds with a minimum investment requirement of $10,000 or less. We removed funds available only to institutional investors, as well as leveraged funds (which seek to boost returns with borrowed money) and inverse index funds (which promise to move in the opposite direction of a benchmark).
Most of the funds listed are widely available at brokerage firms. A few must be purchased directly from the fund company. And some funds are closed, either to new investors or all investors. Many funds in the tables charge a front-end sales fee, but in most cases, you can purchase shares with no load or transaction fee at several large brokerage firms.
That said, these lists are not meant to represent recommendations. Instead, we suggest you use them as a starting point for your own research. (All data and returns are through December 31, unless otherwise noted.)
Large-cap stock mutual funds
Growth was the magic key for mutual funds.
It's been a growth-oriented decade, mostly, for this category. The Fidelity Blue Chip Growth (FBGRX) – a member of the Kiplinger 25 pick, our favorite no-load mutual funds – favors firms with competitive advantages, pricing power and top-flight executives. Nasdaq-100 index funds have prospered along with the mega-cap tech firms that now dominate the market.
Among actively managed funds, one-year standout Zevenbergen Genea (ZVGNX) bets big on ground-breaking companies. The 29-stock portfolio (top holdings: Tesla and Nvidia) is for risk-takers with a long-term mind-set. Virtus Zevenbergen Innovative Growth (SCATX) is sub-advised by the same managers.
Value funds held sway during the three-year period that included the most recent bear market. Oakmark (OAKMX) and sister fund Natixis Oakmark (NEFOX), with Alphabet atop both portfolios, at times display an iconoclastic take on "value." Smead Value (SMVLX) counts a handful of housing stocks and a real estate investment trust (REIT) recently among its top 10 holdings; it ranks in the top 25% of value-oriented peers in seven of the past 10 years.
Mid-cap stock mutual funds
Tech is on top – for now.
Midsize funds that focused on the tech sector did best over the past year. But because the sector has been so volatile, some 2023 winners are still making up for previous years' losses, such as American Beacon ARK Transformational Innovation (ADNPX), managed by ARK Invest's Cathie Wood.
The leaders over longer periods have more-diversified portfolios. Invesco Value Opportunities (VVOAX), for example, scored in the top five for three- and five-year returns thanks to a portfolio heavy on comparatively low-valuation stocks in the industrial, energy and materials sectors.
Baron Focused Growth (BFGFX), number one for both five- and 10-year returns, puts less than 10% of its portfolio in tech stocks. (Its single largest holding, at 13% of assets, is Tesla, classified as a consumer stock.) The Baron portfolio is heavy on hotels, resorts and consumer stocks such as donut company Krispy Kreme (DNUT), which returned almost 50% in 2023.
Small-cap mutual funds
These small-cap mutual funds were mighty.
The lines can blur when labeling small and midsize funds. With an average market value for portfolio holdings of $4.4 billion, Hennessy Cornerstone Mid Cap 30 (HFMDX), featured on three of the winners' lists here, fits well with the smalls. The fund ranks in the top 25% of small-cap funds with a value bent in seven of the past 10 calendar years and in the top 10% for five of them. The 30-stock portfolio recently had big bets, compared with peers, on energy and industrial companies.
The Needham Aggressive Growth Fund (NEAGX) was all-in on tech, with 61% of assets in the sector. The fund, with a lofty 1.9% expense ratio, makes the one-, five- and 10-year winners' lists. Oberweis Micro-Cap (OBMCX) favors the smallest of the small fry; top holding Aehr Test Systems (AEHR) serves the semiconductor industry. The Fuller & Thaler Behavioral Small-Cap Growth Fund (FTXNX) swoops in when the market underreacts to positive news, such as large earnings surprises.
Hybrid mutual funds
Hybrid mutual funds allow for a pastiche of approaches.
These funds hold a mix of stocks, bonds and other assets. Target-date funds fall into this category, but they don't often show up in these tables, which makes the Putnam Retirement Advantage funds' (PCJZX, PAAVX) appearance in the one-year table a little conspicuous.
The rest of the funds are a smorgasbord of strategies. Fidelity Balanced (FBALX) holds a steady mix of roughly 60% stocks and 40% bonds. Baron WealthBuilder (BWBFX) is a fund of funds. It holds 16 Baron funds and is designed to represent the ideal diversified portfolio across market caps, geographies and sectors.
Other funds shift their asset allocation depending on the market. Fairholme Focused Income (FOCIX), for one, aims to generate income and has the leeway to invest in corporate bonds, bank loans, government and agency IOUs, convertible bonds, stocks, and real estate investment trusts, among other assets. At last report, it held roughly 70% of its assets in short-term government bonds and 30% in stocks.
Large-cap foreign stock mutual funds
Large-company foreign stock funds are still lagging U.S. counterparts.
Most years, investors would be delighted with the 16% average return notched in 2023 by funds that specialize in large foreign companies. But that marked the eighth year out of the past 10 that the group underperformed funds of large U.S.-based firms.
One fund that beat the U.S. bogey last year, Brandes International Equity (BIEAX), focuses on value stocks, especially in Europe and South America. Rolls-Royce Holdings (RYCEY), which tripled in 2023 due in part to booming sales of aircraft engines, is a top holding. (The luxury-car nameplate was purchased by BMW in 1998.) Another top holding, Brazilian energy company Petróleo Brasileiro S.A. – Petrobras (PBR), doubled in 2023.
A tech-heavy growth strategy propelled the Fidelity International Capital Appreciation Fund (FIVFX) into the top-10 lists for one, five and 10 years. Its top holding, Taiwan Semiconductor Manufacturing (TSM), gained 30% in 2023 and has more than doubled since the fund's initial investment in October 2019.
Small- and mid-cap foreign stock mutual funds
Small foreign stock funds had a banner year – a turnaround from 2022, when the typical fund lost 23%. Brown Capital Management International Small Company (BCSVX), a Kiplinger 25 fund, gained 20% in 2023, clawing some of the way back from a 32% loss in 2022. The managers favor high-quality growth companies, such as U.K.-based maker of research tools Abcam and REA Group, a global online real estate advertising firm based in Australia.
Value-oriented funds dominate the three-year table, including Oakmark International Small Cap (OAKEX), which is run by David Herro, Michael Manelli and Justin Hance. Last year, they found buys in Europe, where 57% of assets are invested. Shares in top holding Konecranes (KNCRY), a Finland-based firm that makes cranes and lifting equipment, climbed 46% in 2023.
Managed by Jed Weiss, the Fidelity International Small Cap Opportunities Fund (FSCOX) has delivered above-average returns with below-average volatility.
Global stock mutual funds
Global stock mutual funds create a broad universe for investors.
Because these funds typically hold 60% of assets in U.S. shares and the rest in foreign stocks, they fared better over the past year than funds that focus only on foreign stocks. (In fact, U.S. stocks have outpaced foreign markets for much of the past decade.)
T. Rowe Price Global Stock (PRGSX) has outperformed its peer funds, (global large-company growth) in eight of the past 10 calendar years. Top holdings include the usual suspects: Amazon.com, Microsoft, Apple and Nvidia.
The Dodge & Cox Global Stock (DODWX), which follows a value strategy, shone over the past three years. Alphabet is a top holding, but the fund also has a load of healthcare stocks, including pharma giants Sanofi (SNY) in France and GSK (GSK) in the U.K.
Why is the Guinness Atkinson Alternative Energy Fund (GAAEX) listed here and not with the sector funds, below? In part because the fund's holdings are a mix of tech, industrial, basic materials, utilities and economically sensitive consumer stocks.
Diversified emerging market stock mutual funds
These diversified EM stock funds look beyond China.
China stocks fell 11% in 2023, but the MSCI Emerging Markets Index climbed 10% anyway, fueled by double-digit gains in Taiwan, India, South Korea and Brazil. Eye-popping returns in smaller markets – Greece, Hungary, Poland, Mexico and Peru – helped, too.
Funds that top the one-year winners table each held a hefty chunk of assets in India, Mexico and Brazil, but most had some exposure to the U.S., too. The Artisan Developing World Fund (ARTYX) is an outlier in this category; 40% of its assets sit in U.S. stocks.
The Matthews Emerging Markets Small Companies Fund (MSMLX) wins a spot on the three-, five- and 10-year tables. Be aware, however, that new managers took over in 2020. Since then, the fund has been trouncing its competition, which has helped lift its long-term annualized returns.
The Wasatch Emerging Markets Select Fund (WAESX) holds just 30 to 50 stocks, so it can be more volatile, but over the long haul, the results have been solid.
Regional and single-country mutual funds
There are bright spots for investors the world over.
Last year was a good one for multiple regional markets and countries – both developed and developing – including Latin America, Europe, India and Japan.
Perennial winner Fidelity Nordic (FNORX) snagged spots in the one- , five- and 10-year tables, thanks to healthy gains over the past decade in Denmark, the Netherlands and Sweden. (Finland, the fund's only other market exposure, hasn't been as steady.)
Those looking for an India fund might consider Matthews India (MINDX), which has delivered above-average returns with average volatility over the past decade.
Japanese stocks gained 20% last year, thanks to corporate reforms that are, at long last, boosting earnings growth at some firms. But looking ahead, the end of a negative-interest-rate policy in Japan raises uncertainty for stocks in the market. Even so, the Hennessy Japan Fund (HJPNX) stands out over the long haul. The fund lagged peers in 2019, 2021 and 2022, but last year it topped all other Japan-focused funds.
Sector-specific mutual funds
Tech funds dominate the one-year winners, thanks to a small group of companies that led U.S. shares in 2023. One of those stocks, Nvidia, gained 239% over that period. Shares in the chip designer make up 26% of Fidelity Select Semiconductors (FSELX) and helped the fund win the top spot in three time periods. But the fund is more volatile than most tech funds because it confines its investments to semiconductor-related businesses.
Other tech funds, including Fidelity Select Technology (FSPTX) and Columbia Seligman Technology and Information (SLMCX) – which trades load-free at Schwab and Fidelity – invest in multiple tech industries, including software, hardware and internet services. Both funds have been less volatile over the past five and 10 years than other tech funds.
Over three years, energy funds stand tall – that's largely on the back of blockbuster returns in 2021 and 2022. In 2023, energy funds struggled to eke out an average 2% gain.
Alternative mutual funds
Alternative mutual funds offer a wealth of options.
Eclectic, nontraditional strategies that offer diversification from stocks and bonds fit here. Three bitcoin funds – all invest in bitcoin futures contracts – soared to the top of the one-year table after prices of the digital currency rebounded.
But options-based strategies pack the tables. The JPMorgan Hedged Equity 3 Fund (JHTAX), in the one-year table, and its older sibling, the JPMorgan Hedged Equity Fund (JHQAX), a 10-year winner, have the same managers and employ a similar strategy. Part of each fund is invested in stocks to track the S&P 500; the rest is in options to protect against market sell-offs. Over the past decade, Hedged Equity beat the average balanced fund, which invests 60% in stocks and 40% in bonds, with less volatility.
Commodities funds had a terrible 2023, posting an average loss of almost 6%, but they dominate the three-year tables because of hearty gains in 2021 and 2022. The Camelot Event Driven Fund (EVDAX) targets shares in firms involved in mergers, takeovers and other corporate moves.
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.
