A list of top rated mutual funds is only as useful as the rating behind it. This page explains what a mutual fund rating measures, what it leaves out, and how institutional investors go further when they compare funds.
The best-known example is the Morningstar star rating, which ranks funds within their category on risk-adjusted return and awards five stars to the top 10%. Rating providers publish their own methodologies, and these are updated from time to time.
| Limitation | What it means in practice |
|---|---|
| Backward-looking | A rating describes the past. It is not a forecast. |
| Category dependent | A fund can rate well in a narrow category and still be a poor fit for your portfolio. |
| One number | A single score cannot show drawdowns, style drift or how returns were earned. |
| Period sensitive | Ratings move as old periods drop out of the calculation and new ones enter. |
| Portfolio blind | A rating says nothing about how a fund combines with what you already hold. |
The list below is Conrad and Shilling's top ten mutual funds as published in January 2020, with five-year returns as stated at the time. It is shown as a historical example, not as a current ranking.
| Fund | Five-year return |
|---|---|
| Fidelity Contrafund | 16.85% |
| American Funds Growth Fund of America | 16.15% |
| Fidelity 500 Index Fund | 15.07% |
| American Funds Fundamental Investors Fund | 15.03% |
| Vanguard 500 Index Fund | 15.01% |
| American Funds Investment Company of America Fund | 14.71% |
| Vanguard Total Stock Market Index Fund | 14.67% |
| American Funds Washington Mutual Investors Fund | 14.36% |
| Vanguard Small Cap Index Fund | 12.92% |
| American Funds Capital World Growth & Income Fund | 10.80% |
Two things stand out. Only three fund families appear, with American Funds accounting for five of the ten, and four of the ten are index funds. A list like this tells you which large funds did well over one period. It does not tell you which fund suits a particular mandate, which is the question a peer group analysis answers.
AlternativeSoft holds mutual funds, hedge funds and private market funds in one database of 500,000+ funds, with 4,000+ statistics for screening and peer comparison.
This article is for information and education only. It is not investment advice or a recommendation to buy, sell or hold any investment. Past performance is not a guide to future returns.
AlternativeSoft streamlines many useful performance-based analytics including portfolio optimisation, peer evaluation, and relative analyses. An intuitive platform that is additive to our processes.
A practical and user-friendly tool used as part of our portfolio construction and risk management process. Their extensive support and responsiveness provides real added value.
From statistical analysis on a single hedge fund to portfolio construction, risk analysis and stress testing - one of the most effective and intuitive tools I have handled.
Join 150+ institutional investors who rely on AlternativeSoft to select and monitor funds. Book a personalised demo with our team today.
Complete the form and we’ll respond within one business day.