When the coronavirus caused a sharp market correction last year and subsequently sparked a sharp upturn driven by biotechs, tech stocks, and other pandemic plays, mutual fund managers’ reflexes were put to the test. The good news for investors is that a large number of the top mutual funds for 2021 passed the evaluation since managers outperformed the market by selecting superior stocks.
The Investors Business Daily Best Mutual Funds 2021 Awards honor all the funds, in a unique way, that performed better than their benchmark index as of the most recent year’s end. All of the Morningstar universe’s funds that were at least ten years old were examined, and the funds that outperformed their benchmark over the most recent one-, three-, five-, and ten-year periods were determined. The strategy aims to eliminate the one-time winners and highlight investments that have yielded results over the long term as well as recently.
810 funds in total won prizes and were listed as winners of the Best Mutual Funds 2021 Awards. Growth stock mutual funds dominate this group, taking home 307 of the awards. International stocks, with 279 awards, are also well-represented,.
The 691 funds that received IBD Best Mutual Funds Awards the previous year are eclipsed in the number of award winners.
The year 2021 has been a rollercoaster for the stock market, with periods of both significant growth and sharp declines. This volatility has left many investors wondering whether now is a good time to invest in mutual funds.
The answer, as always, is “it depends.” There is no one-size-fits-all answer to this question, as the best time to invest in mutual funds depends on your individual circumstances, investment goals, and risk tolerance.
However there are some general factors to consider when making this decision.
Factors to Consider When Deciding Whether to Invest in Mutual Funds in 2021:
- Market Volatility: The stock market is currently experiencing a high degree of volatility. This means that the value of your investments could fluctuate significantly in the short term. If you are not comfortable with this level of risk, you may want to wait to invest until the market becomes more stable.
- Your Investment Goals: What are you hoping to achieve by investing in mutual funds? Are you looking to grow your wealth over the long term, or are you looking for a way to generate income in the short term? Your investment goals will help you determine which type of mutual fund is right for you.
- Your Risk Tolerance: How much risk are you willing to take with your investments? If you are not comfortable with the possibility of losing money, you may want to invest in a more conservative type of mutual fund.
- Your Time Horizon: How long do you plan to hold your investment? If you are planning to invest for the long term, you may be able to ride out any short-term market fluctuations. However, if you need to access your money in the short term, you may want to choose a more liquid investment.
Benefits of Investing in Mutual Funds in 2021:
- Diversification: Mutual funds offer a way to diversify your investments across a variety of assets. This can help to reduce your risk and improve your chances of achieving your investment goals.
- Professional Management: Mutual funds are managed by professional investment managers who have the experience and expertise to make sound investment decisions. This can be a great benefit for investors who do not have the time or knowledge to manage their own investments.
- Liquidity: Mutual funds are relatively liquid, meaning that you can easily sell your shares and access your money when you need it.
Risks of Investing in Mutual Funds in 2021:
- Market Volatility: As mentioned above, the stock market is currently experiencing a high degree of volatility. This means that the value of your investments could fluctuate significantly in the short term.
- Fees: Mutual funds charge fees, which can eat into your returns. It is important to compare the fees of different mutual funds before you invest.
- No Guarantee of Returns: There is no guarantee that you will make money by investing in mutual funds. The value of your investments could go down as well as up.
Overall, 2021 is not necessarily a bad year to invest in mutual funds. However, it is important to do your research and carefully consider your individual circumstances before making a decision.
Frequently Asked Questions
Is it too late to invest in mutual funds in 2021?
No, it is not too late to invest in mutual funds in 2021. The stock market is still expected to grow over the long term, and mutual funds can be a great way to participate in that growth.
What is the best type of mutual fund to invest in in 2021?
The best type of mutual fund to invest in in 2021 depends on your individual circumstances and investment goals. However, some general recommendations include:
- Index funds: Index funds track a specific market index, such as the S&P 500. They are a good option for investors who want to track the market and minimize their risk.
- Growth funds: Growth funds invest in companies that are expected to grow at a faster rate than the market. They are a good option for investors who are willing to take on more risk in order to potentially achieve higher returns.
- Value funds: Value funds invest in companies that are trading at a discount to their intrinsic value. They are a good option for investors who are looking for bargains.
How much should I invest in mutual funds?
The amount you should invest in mutual funds depends on your individual circumstances and investment goals. However, a general rule of thumb is to invest 10-15% of your income in mutual funds.
How long should I hold my mutual fund investments?
The length of time you should hold your mutual fund investments depends on your investment goals. If you are investing for the long term, you may want to hold your investments for 10 years or more. However, if you need to access your money in the short term, you may want to choose a more liquid investment.
What are the risks of investing in mutual funds?
The risks of investing in mutual funds include market volatility, fees, and no guarantee of returns.
How can I reduce my risk when investing in mutual funds?
You can reduce your risk when investing in mutual funds by diversifying your investments, investing for the long term, and choosing low-fee mutual funds.
Investing in mutual funds can be a great way to grow your wealth over time. However, it is important to do your research and carefully consider your individual circumstances before making a decision.
Additional Resources
- Forbes Advisor: When Is The Best Time To Invest In Mutual Funds?
- Quora: What is the right time to invest in a mutual fund in 2021?
Disclaimer
I am an AI chatbot and cannot provide financial advice. The information provided above is for general knowledge and informational purposes only, and does not constitute financial advice. It is essential to consult with a qualified financial advisor before making any investment decisions.
For two years running, no fund or theme has been able to rank among the top-performing funds. This indicates that the top-performing funds list will be updated frequently. No market capitalization, industry, or theme performs well all the time. Every year one theme or sector will outperform the others.
For instance, the majority of the best-performing mutual funds on the list in 2016 had a banking and financial services theme. While Small Cap and Infrastructure funds topped the return charts in 2017 But in 2018, the Technology Funds were the ones to make it to the list of the top 10 funds.
The aforementioned list displays equity funds with the highest SIP return over a ten-year period, excluding sectoral and theme funds. SIP return is a good criterion for choosing mutual funds. But the aforementioned list is not a list of suggestions because you should consider a number of other factors in addition to the SIP returns when choosing a mutual fund.
It is evident that small-cap funds and theme funds rank highly on the list of the best-performing funds for 2021. To find the answer to this question, let’s take a look at the list of the top mutual funds for the previous five years. But has this always been the case? Do small caps always top the return chart?
As a result, you cannot just sort the funds based on annual return when selecting the Best Mutual Fund for SIP. You should consider the long-term winners who have demonstrated an ability to reliably generate higher returns. Additionally, you should avoid choosing SIPs based on themes or sectors because these funds are less diversified than large-cap, large and mid-cap, and flexible-cap funds. The effectiveness of various sectors and themes influences the performance of sectoral and thematic funds. Because certain themes perform better than others (as the table winners demonstrate), it’s critical to plan your entry and exit from these types of funds.
Some Of The Best Mutual Funds By Category
Here is a list of some of the top mutual funds for 2021, broken down by category:
- 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)