Overview of 10 Investment Funds of 2015
Recommending the best investment funds to build a portfolio is extremely challenging.
That's because the term "best" might be relative (at best), depending on a number of factors, including:
- An investor's investment objectives
- His/her age
- Their appetite for risk
- Their investment preferences
As a result, what may reasonably be considered the best investment funds by some investors, may very well not be considered as such by others.
However, a select list of funds could be drawn based on a generalized set of investment thesis that is broadly applicable to most investors.
Investment thesis – 2015 and beyond
What, therefore, would be a reasonable investment thesis for the later part of 2015 and well into 2016?
Long-term investors in the best investment funds can reasonably build a relatively "safe" portfolio by making some reasonable assumptions about global financial markets in general, and about some select economies.
Here are a few assumptions that are more likely to pan out than not:
- While they may not rise in the next month or so, interest rates have only one way to go over the next several quarters – UP!
- Even though interest rates may have a negative impact on fixed income investments, the best investment funds will also include long and short-term bond funds to balance a portfolio
- Despite its debt crises and talk about the "financial cliff", there's no doubt that the U.S. economy has rebounded and is well into its recovery phase
- Despite the ongoing crisis that we see Europe facing, most nations there will be on track to emerge out of their issues and get into recovery mode
- The best investment funds will span investments across multiple asset classes such as Large Cap, Mid Cap, Small Cap, Growth and Value investments
- While many large cap companies have performed well so far, as the global economy starts to recover, smaller cap companies will soon start to come into their own
- Investors will receive best value for their investments when focusing on "total return" – including income (interest/dividends) and capital appreciation
- Accounting for roughly 50% of global market capitalization, Emerging markets must play a key role in any long-term portfolio that's built on some of the best investment funds
And while keeping the above thesis in mind, investors should not forget the two main pillars of portfolio construction: Investment objective, and diversification.
When we add these last two ingredients to the mix, we can come up with a pretty well balanced list of investments that can qualify as the best investment funds.
10 Investment funds to consider
Using these guiding principles, let's take a look at some of the best investment funds that should make up a portfolio for the rest of 2015 and beyond:
Vanguard 500 Index Fund (VFINX)
With 98% of its capital invested in large-cap companies in North America, this is a bet on developed markets continuing to do well over the foreseeable future.
Designed to replicate the performance of Standard & Poor's 500 index, VFINX has delivered returns of 9.37% YTD, and 18.86%, 23.32% and 15.47% over a 1-year, 3-year and 5-year period respectively.
Its largest holdings are in Technology (17%+), with significant weight (14%+) in Financial Services and Healthcare, followed by Consumer Cyclicals, Energy and Industrials (10%+).
PIMCO Long Duration Total Return Fund (PLRIX)
Some of the best investment funds for 2015 include Fixed Income funds, and PLRIX is one such vehicle.
Designed to deliver the highest "Total Return" without undue risk taking, the fund has delivered returns of 17.08%, 7.74% and 9.27% over the past 1 year, 3 years and 5 years respectively by investing in Long-Term bonds.
Roughly 65% of its holdings are represented by diversified Fixed Income investments of varying maturities.
Additionally, it may also invest up to 10% of the fund in high yielding "junk" bonds that are at least rated an equivalent of "B" or higher by Moody's, S&P and Fitch.
Frost Total Return Bond A (FATRX)
An excellent Short-Term Bond fund, the reason that FATRX makes our list of best investment funds for 2015 and beyond, is because it has consistently delivered better returns than other Fixed Income vehicles available.
The fund has returned 5.9%, 7.4%, 6.4% and 7.2% annualized, inclusive of income and capital appreciation, over the past ten, five, three and one year respectively. YTD, the fund has delivered 4.5% to its investors.
Actively managed, this fund invests 80% of its wealth into fixed income securities.
The T. Rowe Price Diversified Small Cap Growth Fund Bond A (PRDSX)
Having outshone (though modestly!) its peer group in 2013, PRDSX earns its place on our list of best investment funds because it is a bet on the belief that Small Cap companies will continue to do better over the coming quarters.
The fund has delivered 11.6%, 21.6%, 21.1% and 20.7% returns annualized over the last ten, five, three and one year periods. YTD, PRDSX has returned 3.6% to its investors so far.
The fund uses a quantitative approach to screening the universe of the MSCI U.S. Small Cap Growth Index for its investment targets, thereby removing "emotion" from the equation.
The screen evaluates a number of factors, including ROE and Cash Flow.
The Delaware Pooled Large-Cap Growth Equity Fund (DPLGX)
DPLGX is one of the best investment funds when it comes to delivering on investors need for capital appreciation.
This investment in large-cap securities, which have the potential of growing faster than the U.S. economy, is a bet on the continued growth of the U.S. economy – and then some.
Over the past 10, 5, and 3 years, DPLGX has returned an impressive 19.1%, 20.2%, 24.9%, and 6.7% YTD to its investors.
Roughly 92% of its funds are invested in U.S Stocks, with 7.5% going into non-U.S. equities.
Becker Value Equity Retail Fund (BVEFX)
Long-term investors, looking for the best investment funds that will help reduce the tensions around an impending retirement, will find BVEFX worth considering.
Managed by a veteran investment manager with 30+ years of managing funds for clients, BVEFX offers value to investors by delivering long-term capital appreciation. It primarily invests in equities and equivalents, such as Warrants, Convertibles and Rights.
Over the past 10, 5, 3 and 1 year, the fund has delivered returns of 9.4%, 15.9%, 20.9% and 24.8% respectively. YTD the fund has returned 8.5% to its investors.
While an overwhelming majority (97%) of its capital is invested in North America, the fund also has a 3% weighting to European assets.
TIAA-CREF Lifecycle Retirement Income Fund (TLRIX)
Specifically targeted for retirement-income seekers, TLRIX fits the bill to qualify as one of the best investment funds because it delivers exactly what retirees look for – steady income and safety of capital.
The fund's major objective is to deliver high total returns through the life of the investment, primarily through higher income and secondarily through longer-term capital appreciation. Structured as a "fund of funds", TLRIX invests 40% of its capital to equity-based funds, and 60% to fixed-income funds.
It is well diversified, with 70% of its investments held in the Americas, 19% in Europe and 11% in Asia, thus offering exposure to both developed (94%) and developing (6%) markets.
The fund boasts impressive 5, 3 and 1 year returns of 8.9%, 9.1% and 12% respectively, with a YTD return of 5% so far.
T. Rowe Price Strategic Income Fund (PRSAX)
Investors looking to invest in the best investment funds that offer broader non-U.S. diversification will get exactly that in PRSAX. Primarily focused on delivering high income to investors, the fund also aims to offer some appreciation of capital.
However, 80% of its capital is allocated to income-generating assets. PRSAX offers investors excellent diversification into non-US assets by investing up to 50% of its capital in markets other than the U.S., including the U.K (4%), Brazil (4%), Germany (3%), Indonesia (3%) and Mexico (2.5%). Up to 50% of its bond holdings are between 1 to 3 years maturity, with the remainder varying in maturity from 7 to 30+ years.
Over the past 5, 3 and 1 year, the fund has delivered 6.6%, 5.9% and 9.3% to its holders, with an YTD return of 6.4%.
Fidelity Select Insurance Portfolio (FSPCX)
FSPCX makes the cut into the ranks of the best investment funds because it is a bet on global financial, industrial and commercial recovery.
The fund delivers stellar returns through capital appreciation in the securities it invests in. The funds' managers invest up to 80% of their assets into stocks of companies involved in the global insurance and underwriting business.
As global economic activity continues to pick up pace, companies involved in these businesses will flourish, thus delivering better returns to investors.
Investment candidate securities are carefully screened for market leadership, financial outlook and economic conditions.
Over the past 10, 5, 3 and 1 year, the fund has delivered 5.9%, 15.7%, 24.1% and 22.8% to its holders, with an YTD return of 4.7%.
Harbor Mid Cap Value Fund (HAMVX)
HAMVX is ideal for investors seeking higher total return in the long run. The fund primarily comprises of investments in common stocks of companies in the mid-cap range.
This fund makes it in our list of best investment funds primarily because it is a "contrarian" play. Fund managers look for target investments that are undervalued because they fall out of favor with investors.
The fund invests in a broad range of sectors, including Financial Services (18%), Technology (15%), Consumer Cyclical (12%) and Industrials (11%), with lesser weighting in Real Estate, Utilities, Health Care and other sectors.
Over the past 10, 5, 3 and 1 year, the fund has delivered 10.3%, 19.9%, 25.6% and 29.4% to its holders, with an YTD return of 11. 4%.