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Mutual Funds: The Basics and Top Performers in 2023

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A comprehensive guide to mutual funds, including top performers and expert advice for investing.

description: a graph showing the performance of different mutual funds over time, with the top performers highlighted in green.

Since the first modern mutual fund was launched in the U.S. investment landscape in 1924, investors have increasingly turned to these types of investments as a way to diversify their portfolios and potentially earn higher returns. But what exactly is a mutual fund?

In simple terms, a mutual fund is a type of investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. Each investor owns a portion of the fund's holdings, and profits and losses are shared proportionally.

One of the main benefits of mutual funds is their diversification. By investing in a fund with a variety of stocks or bonds, investors can spread their risk and potentially earn higher returns than if they invested in just one or a few individual securities.

There are many different types of mutual funds, each with its own investment strategy and risk profile. For example, some funds invest primarily in large-cap stocks, while others focus on small-cap or international equities. Bond funds may invest in government or corporate bonds, or a mix of both.

In this piece, we will take a look at the 20 best mutual funds in 2023. For more mutual funds, head on over to 10 Best Mutual Funds in 2023.

Before we dive into the top performers, it's important to understand how to choose a mutual fund that's right for you. First things first: Personal finance experts recommend buying the funds directly from the mutual fund company rather than through a broker. This can help you avoid unnecessary fees and potentially save you money over time.

Another key factor to consider is the fund's expense ratio, which represents the annual cost of owning the fund. Generally speaking, lower expense ratios are better, as they leave more money in your pocket to potentially earn returns.

Looking for the top mutual funds? These are the best U.S. equity stock funds based on their five-year performance:

  • Vanguard 500 Index Fund (VFIAX)

  • T. Rowe Price Equity Income Fund (PRFDX)

  • Fidelity Low-Priced Stock Fund (FLPSX)

  • American Funds Growth Fund of America (AGTHX)

  • Dodge & Cox Stock Fund (DODGX) Vanguard has built a sterling reputation by offering high-quality, low-cost mutual funds designed to perform well over the long term. Here are some of the top Vanguard funds to invest in for the long term:

  • Vanguard Total Stock Market Index Fund (VTSAX)

  • Vanguard Total Bond Market Index Fund (VBTLX)

  • Vanguard 500 Index Fund (VFIAX)

  • Vanguard Small-Cap Value Index Fund (VSIAX)

  • Vanguard Dividend Growth Fund (VDIGX) In the U.S., Vanguard offers 204 funds with an average 2022 asset-weighted expense ratio of 0.08%, a testament to its commitment to low fees and high-quality investments.

Of course, there are many other excellent mutual funds to consider beyond these top performers. With literally thousands of available mutual funds, how do you find the top ones for your portfolio? Bankrate has highlighted some of the best mutual funds to invest in based on factors like performance, fees, and manager tenure.

Ultimately, the best mutual fund for you will depend on your investment goals, risk tolerance, and personal preferences. By doing your research and consulting with a financial advisor if necessary, you can find a mutual fund that fits your needs and helps you achieve your financial goals.

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