Fund Scores Find Standouts

12/21/2015


Looking for the best funds for 2016? Start your search with our fund scores, which cover nearly 5,500 mutual funds and exchange-traded funds.

The scores are calculated monthly based on total returns, expense ratios, tax-efficiency, and risk-adjusted performance. Our scores help isolate high-potential funds, a duty performed with great success this year.

FUND SCORES PROVIDE AN EDGE
Our fund-ranking system has worked particularly well in 2015 on U.S. stock funds — the backbone of most fund portfolios. For example, based on returns through Dec. 14, large-cap blend funds that scored above 90 at the start of the year outperformed the average fund in the category by 1.3%.
--- Average Year-To-Date Outperformance ---
Fund Category
(Number Of Funds)
Average
Year-To-
Date Return
(%)
Scores
Above 90
(%)
Scores
Above 80
(%)
Scores
Below 20
(%)
Large-cap blend (305)
(2.5)
1.3
1.4
(2.2)
Large-cap growth (320)
2.4
1.8
1.7
(1.7)
Large-cap value (221)
(5.4)
1.6
1.6
(2.1)
Midcap blend (101)
(6.1)
1.3
0.6
(1.8)
Midcap growth (154)
(2.0)
2.1
2.4
(1.6)
Midcap value (86)
(6.9)
1.6
0.1
(1.3)
Small-cap blend (151)
(7.1)
1.8
2.0
(3.9)
Small-cap growth (152)
(3.5)
1.3
1.6
(0.6)
Small-cap value (79)
(8.9)
0.6
0.2
(3.5)

How do we know that? We examined the relative performance of nearly 3,150 funds from 30 large and popular categories. We measured how funds scoring above 80 a year ago went on to perform this year, relative to the average fund in the category. We also considered funds with scores below 20 to see if they underperformed. Our research showed:

• Our scores worked across a broad swath of categories. Based on average returns, funds with high scores outperformed the average fund in 27 of the 30 categories. An average of returns for all 30 groups implied an outperformance of 1.1% so far this year.

• Funds with the very highest scores fared even better. Across the 30 categories, funds scoring above 90 outperformed their category averages by an average of 1.3% in 2015. Extra-high scorers outperformed funds with scores above 80 in 22 of the 30 groups. Ranks were ineffective in only two fund categories this year: Foreign large-cap growth and financials.

• Laggards continued to underachieve, as funds scoring below 20 underperformed the average fund in 27 of the 30 categories, with average underperformance for all groups at 1.5%.

Our research suggests funds that earn high scores tend to outperform. To be sure, the study is not infallible, as it covers a single and relatively short time period. Moreover, outsized gains or losses for just a handful of funds can impact statistics for thinly populated categories.

Still, our fund-rating system favors low-cost funds with strong track records — two highly desirable traits. Rankings are available online in the Subscriber Area at www.DowTheory.com. Our 20 top picks are listed below. Also below we highlight 92 standouts selected using our fund-ranking system. The average score across the 92 no-load funds is an impressive 94. Three of our favorite funds are profiled below.

PRIMECAP Odyssey ($24; POSKX) earns the maximum fund score of 100, reflecting an attractive combination of performance and reasonable expenses. The fund invests mostly in large companies, preferably stocks that have the potential to exceed Wall Street earnings estimates. The fund held nearly 130 stocks on Sep. 30, and technology accounted for 28% of assets. PRIMECAP, up 1.8% this year, has a 0.62% expense ratio.


T. Rowe Price Diversified Small Cap Growth ($26; PRDSX) has a killer track record — the fund ranks in the top 10% of its peers for three-, five-, and 10-year returns. The fund, up 2.0% this year, holds nearly 300 stocks, favoring technology (24% of assets), health care (21%), and industrials (14%). The fund has a score of 97.


Vanguard Short-Term Investment-Grade ($11; VFSTX), a longstanding favorite, boasts a fund score of 99. An excellent all-weather pick, the fund invests in high-quality bonds with short-term maturities and should appeal to conservative investors. Over the last 10 years, the fund gained 3.5% annually, versus 2.9% for its peer group. Up 1.1% so far in 2015, the fund yields 1.9% and has a duration of less than three years.

OUR RECOMMENDED MUTUAL FUNDS
Year-To-Date *
--- % Of Portfolio ---
 
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Fund
Rating **
Artisan International ($28; ARTIX)
(4.8)
E
9
9
46
Baird Core Plus Bond ($11; BCOSX)
0.0
C
9
4
86
Dreyfus Midcap Index ($37; PESPX)
(2.8)
B
0
0
63
Dreyfus Small Cap Stock Index
($28; DISSX)
(2.4)
B
0
0
93
Homestead Small Company
($38; HSCSX)
(4.3)
B
5
6
95
iShares MSCI EAFE Small-Cap ETF
($50; SCZ)
7.4
A
4
6
95
PRIMECAP Odyssey Stock ($24; POSKX)
1.8
A
10
10
100
T. Rowe Price Divers. Small-Cap Growth
($26; PRDSX)
2.0
A
7
7
97
T. Rowe Price Value
($31; TRVLX)
(2.3)
B
10
11
84
Thompson Bond ($11; THOPX)
(2.6)
E
9
4
37
Vanguard 500 Index ($189; VFINX)
1.2
B
7
8
85
Vanguard GNMA ($11; VFIIX)
1.2
A
0
0
92
Vanguard Growth Index
($55; VIGRX)
3.2
C
10
11
83
Vanguard High-Yield Corp. ($6; VWEHX)
(2.1)
B
5
6
99
Vanguard Inter.-Term Tax-Exempt
($14; VWITX)
2.5
B
0
0
92
Vanguard Selected Value
($27; VASVX)
(4.3)
B
5
8
79
Vanguard Short-Term Invest.-Grade
($11; VFSTX)
1.1
A
0
0
99
Vanguard Total Bond Mkt. Index
($11; VBMFX)
0.3
B
0
0
65
Vanguard Wellesley Income
($25; VWINX)
1.1
A
0
0
99
Vanguard Wellington ($38; VWELX)
(0.1)
A
10
10
96

* Year-to-date ranks through Dec. 15 from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%;
E = bottom 20%. ** Fund ratings are percentile ranks based on our fund-rating system.

 

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92 top-ranked funds worth a look
---- Total Return ----
Category
Fund (Price; Ticker)
Year-
To-Date
(%)
3-Year
Annual.
(%)
Expense
Ratio
(%)
Fund
Rating
Large-Cap Blend
**
PowerShrs. S&P 500 High Qlty. ($23; SPHQ)
1.2
16.0
0.29
100
PRIMECAP Odyssey ($24; POSKX)
1.8
16.5
0.62
100
Large-Cap Growth
**
PowerShares Dynamic Growth ($32; PWB)
7.6
19.5
0.58
98
T. Rowe Price Blue Chip Gro. ($72; TRBCX)
10.6
20.3
0.72
98
Large-Cap Value
T. Rowe Price Value ($31; TRVLX)
(2.3)
15.5
0.82
84
Vanguard U.S. Value ($17; VUVLX)
(1.9)
15.2
0.26
100
Midcap Blend
**
Vanguard Mid-Cap ($121; VO)
(2.0)
15.3
0.09
100
Vanguard Strategic Equity ($31; VSEQX)
(2.1)
17.2
0.21
99
Midcap Growth
Fidelity Growth Strategies ($33; FDEGX)
3.4
18.0
0.72
99
Nicholas ($64; NICSX)
(3.4)
16.6
0.72
92
Midcap Value
Fidelity Mid Cap Value ($22; FSMVX)
(5.7)
16.0
0.83
87
**
Vanguard Mid-Cap Value ($86; VOE)
(2.8)
15.8
0.09
100
Small-Cap Blend
Homestead Small Co. Stock ($38; HSCSX)
(4.3)
13.3
0.89
95
**
iShares Core S&P Small-Cap ($111; IJR)
(2.1)
14.7
0.12
99
Small-Cap Growth
T. Rowe Price Divers. Small ($26; PRDSX)
2.0
16.9
0.85
97
**
Vang. S&P Small-Cap 600 Gro. ($108; VIOG)
2.7
16.2
0.20
99
Small-Cap Value
**
iShares S&P Sm.-Cap 600 Value ($109; IJS)
(7.4)
12.7
0.25
94
**
Vanguard Small-Cap Value ($100; VBR)
(5.2)
13.7
0.09
100
Foreign Large-Cap Blend
Fidelity Overseas ($40; FOSFX)
6.6
9.7
1.04
100
Schwab Int'l Core ($9; SICNX)
1.8
7.2
0.86
98
Balanced — Aggressive
Fidelity Four-in-One Index ($37; FFNOX)
(0.4)
10.2
0.22
100
Vanguard LifeStrategy Gro. ($28; VASGX)
(1.8)
8.9
0.17
95
Balanced — Conservative
USAA Growth & Tax Strategy ($17; USBLX)
1.8
8.4
0.84
98
Vanguard Wellesley Income ($25; VWINX)
1.1
6.0
0.25
99
Balanced — Moderate
Bruce ($517; BRUFX)
2.4
11.8
0.71
98
Vanguard Wellington ($38; VWELX)
(0.1)
9.7
0.00
96
Corporate Bond
**
Vanguard Intermediate-Term ($84; VCIT)
0.6
2.0
0.12
96
Vang. Int.-Term Inv. Grade ($10; VFICX)
1.5
1.9
0.20
94
Emerging Markets — Bond
Fidelity New Markets Income ($15; FNMIX)
0.3
(0.6)
0.90
91
**
PowerShares Emerg. Mkt. Debt ($27; PCY)
2.1
0.3
0.50
100
Emerging Markets — Stock
American Cent. Emerg. Mkts. ($8; TWMIX)
(9.0)
(2.9)
1.45
97
Fidelity Emerging Markets ($21; FEMKX)
11.2
(1.5)
1.07
100
Foreign Large-Cap Growth
Fidelity Int'l Capital ($16; FIVFX)
2.0
9.0
1.14
100
**
iShares MSCI EAFE Growth ($67; EFG)
2.6
6.1
0.40
96
Foreign Large-Cap Value
Schwab Fundamental Int'l ($8; SFNNX)
(6.3)
4.0
0.35
93
Tweedy, Browne Global Val. ($25; TBGVX)
(3.0)
5.6
1.37
86
Foreign Small & Midcap
iShares MSCI EAFE Small-Cap ($50; SCZ)
7.4
10.2
0.40
95
T. Rowe Price Int'l Discovery ($56; PRIDX)
7.8
10.7
1.21
96
Government Intermediate-Term
**
Schwab Intermediate-Term ($54; SCHR)
1.6
1.0
0.09
98
Vanguard GNMA ($11; VFIIX)
1.2
1.9
0.21
92
Government Long-Term
**
Vanguard Extended Duration ($117; EDV)
(3.7)
2.9
0.12
88
**
Vanguard Long-Term Gov. ($75; VGLT)
(1.1)
2.2
0.12
100
Government Short-Term
**
Schwab Short-Term Treasury ($50; SCHO)
0.4
0.4
0.08
95
Vanguard Short-Term Federal ($11; VSGBX)
0.7
0.5
0.20
100
High-Yield Bond
Fidelity Capital & Income ($9; FAGIX)
(1.6)
4.7
0.72
98