Best Mutual Funds That Repeatedly Top The Market (2024)

Mutual fund managers saw their reflexes tested when the coronavirus touched off a steep market correction last year and then ignited a sharp upturn fired by biotechs, tech stocks and other pandemic plays. The good news for shareholders is how many of the best mutual funds for 2021 passed the test, as managers used their stock-picking skills to beat the market.

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Investor's Business Daily's Best Mutual Funds 2021 Awards recognize all the funds that outperformed their benchmark index as of the latest year-end, and in a very special way. We looked at all the funds in the Morningstar universe that were at least 10 years old and identified those that beat their benchmark for the latest one-year, three-year, five-year and 10-year periods. The approach is designed to weed out the one-time wonders and spotlight funds that produced results not just recently but over the long haul.

Altogether, 810 funds earned awards and a place on our list of Best Mutual Funds 2021 Awards winners. Among those, growth stock mutual funds rule the roost, accounting for 307 of the awards. International stocks, with 279 awards, are also well-represented,

The number of award winners tops the 691 funds that earned IBD Best Mutual Funds Awards last year.

• View Full Special Report: Best Mutual Funds Awards
• Go To Our Lists Of All Award-Winning Funds By Category
• How To Use The Best Mutual Funds To Form Part Of Your Investment Portfolio

Best Mutual Funds 2021: More To Choose From

Naturally, that's a boon for shareholders. It means they have more of the best mutual funds to choose from as they put together portfolios that suit their needs, goals, time frame and stomach for risk.

Our list breaks down U.S. diversified stock funds by market cap focus as well as the best growth stock mutual funds and blend funds. We also list sector funds, international stock funds, index funds and the best bond funds. Bonds are broken down into U.S. taxable, muni bonds and international bond funds.

Managers of each winning fund must find stocks or bonds that, year over year, spark their funds to outperform their benchmarks in time periods short and long.

Winners in this sixth annual edition of the awards had to outperform despite the market's challenges over the past 10 years.

In many ways, calendar 2020 was a cross-section of that entire decade. It subjected fund shareholders to stomach-twisting ups and downs, uncertainty and turmoil. The year featured giddy highs. It exasperated with nerve-wracking lows.

Hurdles For The Best Mutual Funds In 2020

The 18.4% return for the broad market in 2020 as reflected in the S&P 500 was well above the long-term average of about 10%. And that came in a year in which some industries, such as restaurants, travel and airlines, were crushed by the coronavirus pandemic. Yet other businesses, like e-commerce, flourished. Companies like Zoom (ZM) went from unknowns to household names.

The award-winning funds' managers brainstormed their ways to outperformance. Besides the one-year benchmark, funds that compare to the S&P 500 had to beat the index's average annual gains of 14.18% for the past three years, 15.22% for the past five years and 13.88% over the trailing 10 years.

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Those were high hurdles to clear. But a lot of funds managed to do just that. And more so than in the prior year. This year's 810 winners represent 24% of eligible funds with a track record of 10 years or more. Last year's 691 winners were just 20% of the contenders.

IBD's summary list of winners shows the top five funds in each of 13 categories and subcategories. The industry consists of around 8,000 mutual funds. We narrowed that to 3,368 mutual funds that are 10 years old. Then we screened for those that beat their benchmark indexes in the four time periods ended Dec. 31, 2020.

Benchmarks For Best Mutual Funds 2021

For most groups of funds, the benchmark is the S&P 500. That's the case for U.S. Diversified Stock Funds, Growth Funds, Blend Funds (which invest in both growth-oriented and value-oriented stocks), Value Funds, Large-Cap Funds, Midcap Funds, Small-Cap Funds, Sector Funds and Index Funds.

For International Stock Funds, the benchmark is the MSCI EAFE Index. The EAFE is focused on developed markets.

The bogey to beat for U.S. Taxable Bond Funds is the Bloomberg Barclays US Aggregate Bond Index.

Municipal Bond Funds are measured against the Bloomberg Barclays Municipal Bond Index.

And International Bond Funds had to beat the Bloomberg Barclays Global Aggregate Index to become IBD Best Mutual Funds Award winners.

If you're looking for mutual funds for your retirement account, you may want to first look at our Supercharge Your Retirement special report.

Mutual Fund Performance

Growth Stock Funds formed the category with the highest percentage of winners. With 307 Award winners out of 506 funds with a 10-year history, 61% of growthfunds won an IBD Best Mutual Funds Award.

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Not too far behind were International Stock Funds. Forty-eight percent of that group's 585 eligible funds made the cut.

One key path to outperformance is finding stocks with sustainable growth. Another is investing in stocks whose earnings growth is way above average.

That's how Michael Baron, a manager of $7.1 billion Baron Partners Retail Fund (BPTRX), summarizes the strategy that made his fund the top dog in three categories: U.S. Diversified Stock Funds, Growth Stock Funds and Midcap Funds.

"We're looking for companies with tremendous growth opportunities and companies with real, sustainable growth advantages," he said.

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Baron Partners notched a 23.71% average annual gain over the decade ended last Dec. 31. That was the best 10-year pace by any award winner.

It closed the 10-year period with a 148.52% total return in 2020 alone.

The only fund on the best mutual funds list that topped the 2020 gain was the 150.57% pogo-stick bounce by $2 billion Morgan Stanley Institutional Inception I (MSSGX). That fund was a top-five performer in the Best Small-Cap Stock Funds group.

Goose Egg For Value Funds — Again

Value Funds are the opposite of Growth Stock Funds — not only in investment philosophy, but also in results.

The Value Funds category was the only group that sent zero representatives to the Best Mutual Funds winners' podium. That makes this the fourth straight year that Value Funds posted a goose egg. The focus on stocks that are often cyclical and largely defensive in nature failed to produce any funds that outperformed the S&P 500 over all four time periods ended in 2020.

That's no surprise. The past decade was dominated by a 131-month bull market that began in March 2009. That was the longest bull market since at least 1921, according to Sam Stovall, chief investment strategist of CFRA Research.

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Yet 2021 appears to be a comeback year for value funds' performance. Indeed, large-cap value and midcap value, while still underperforming large-cap growth funds, moved up in the list of U.S. diversified mutual funds on a year-to-date basis through Oct. 31, 2021.

Other Fund Categories

Besides Growth Stock Funds and International Stock Funds, five other categories sent at least 20% of their contenders to the champions' column.

Large-Cap and Midcap Funds each enjoyed a 26% winning rate. Close behind was the broader U.S. Diversified Stock Funds group, where 25% of funds with track records of 10 years or better qualified.

Among Small-Cap Stock Funds, 21% made the list; and 26% of U.S. Taxable Bond Funds were award winners.

Funds Winning In Multiple Categories

Baron Partners Retail was not alone in making the Best Mutual Funds list in more than one category.

Just to name a few, Morgan Stanley Insight I (CPODX) was a top-five winner in U.S. Diversified Stock Funds, Growth Funds and Large-Cap Funds.

Its stablemate, Morgan Stanley Institutional Growth I (MSEQX), made the same triple play in the same categories.

Virtus KAR Small-Cap Growth I (PXSGX), whose subadvisor is Kayne Anderson Rudnick Investment Management, scored a trifecta in U.S. Diversified Stock Funds, Growth Stock Funds and Small-Cap Stock Funds.

Some Of The Best Mutual Funds By Category

These are a sampling of some the 2021 Best Mutual Funds by categories:

• U.S. Diversified Stock Funds: Baron Partners Retail (BPTRX)
• Growth Stock Funds: Morgan Stanley Insight I (CPODX)
• Blend Funds: Pimco StocksPlus Absolute Return Instl (PSPTX)
• Large-Cap Funds: Virtus Zevenbergen Innovative Growth Stock A (SAGAX)
• Midcap Funds: T. Rowe Price New Horizons (PRNHX)
• Small-Cap Funds: Lord Abbett Micro Cap Growth I (LMIYX)
• Sector Funds: T. Rowe Price Global Technology (PRGTX)
• International Stock Funds: Morgan Stanley Inst Global Advantage I (MIGTX)
• U.S. Taxable Bond Funds: Virtus AllianzGI Convertible Institutional (ANNPX)
• Municipal Bond Funds: Invesco Rochester Municipal Opportunities A (ORNAX)
• International Bond Funds: PGIM Global Total Return A (GTRAX)
• Index Funds: Shelton Nasdaq-100 Index Direct (NASDX)

Fund Families' Best Mutual Funds Awards Winners

Some fund families showed much more proficiency than others at landing funds on winners' lists.

Fidelity Investments leads the leaders parade. The behemoth Boston-based complex's funds picked up 77 of IBD's 2021 Best Mutual Funds Awards, including multiple wins by some funds.

That's 40% more than the second most prolific complex. Baltimore-based T. Rowe Price's funds appear 55 times on the winners' list.

The Alger and Invesco fund families were next, with 41 and 40 Best Mutual Funds Awards, respectively.

The top 10 fund families are rounded out by Franklin Templeton, with 35 fund awards; Vanguard and Wells Fargo, with 30 each; Janus Henderson, 29; and Virtus and Voya, with 28 apiece.

Best Mutual Funds' Strategies

What enabled winners to win?

Some winning strategies are clear even at a glance. Index Funds winners are top-heavy with portfolios that target the Nasdaq 100 Index. That index holds big nonfinancial stocks, including many big technology stocks such as the super-popular FAANG stocks — Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google parent Alphabet (GOOGL).

The best U.S. Taxable Bond Funds? Four of the five top mutual funds declare their appetite for convertible securities. Those securities' prices tend to act more like stocks than bonds, rising in bull markets.

Winners among Sector Funds? Plenty of the funds hunt for innovative stocks, including technology-sector funds and medical technology funds. Fidelity Select Retail (FSRPX) has big weightings in companies that use technology to sell goods online, including Amazon, Target (TGT) and Mercadolibre (MELI).

This article was originally published on March 26, 2021, and was updated on November 16, 2021.

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