What types of stock funds can help investors continue to profit as we approach the start of the 10th year of the bull market? Funds that have done well recently and should continue to do well include ones that focus on foreign countries, technology or fast-growing companies.
Here are my picks for the 10 best no-load stock funds for 2018…
If you are comfortable with funds that invest in very volatile stocks, consider putting up to 5% of your stock portfolio in each of these three funds. They have some of the strongest prospects for gains in the coming year.
Driehaus Emerging Markets Growth Fund (DREGX) focuses on consumer-driven businesses and information-technology companies in developing countries ranging from Brazil and South Africa to China and India. Emerging markets, whose debt is typically denominated in US dollars, are benefiting from low US interest rates, a weakening dollar and a rebound in prices for commodities they produce. A substantial allocation to “frontier” markets such as Argentina and Kazakhstan has made this fund volatile but boosted performance enough to place it in the top 14% of funds in its category over the past 10 years. Performance: 36% (one-year) and 2.7% (10-year).* Driehaus.com
iShares MSCI Eurozone ETF (EZU) is an exchange-traded fund tracking an index that can be considered the eurozone version of the Dow Jones Industrial Average—dominated by well-known multinational giants, often in the financial-services and industrial sectors. After several years of depressed prices, stocks of companies based in the 19 nations that comprise the eurozone soared in 2017 as the region showed surprising economic strength. Despite that run-up, valuations are about 20% cheaper than the Dow components because eurozone stocks never had the robust bull market rally of the US, and many still are below their 2007 highs. The European Central Bank’s aggressive economic stimulus efforts also could help these companies. Performance: 30.7% (one-year) and –0.2% (10-year). iShares.com
Janus Henderson Global Technology Fund (JAGTX) offers exposure to the largest and best-known US tech companies including Alphabet, Apple and Facebook—but the managers also are skilled at picking small, fast-growing foreign tech companies. Tech stocks were among the best-performing areas of the market in 2017. They benefit from the ongoing shift toward cloud computing and the robust demand for software and semiconductor chips in nontech industries such as the automotive and industrial sectors. Performance: 46% (one-year) and 12% (10-year). JanusHenderson.com
Moderately Aggressive Funds
If you can handle moderate volatility and can afford to wait out any declines in stock prices, you can put the majority of your stock portfolio in these funds.
Laudus International Market-Masters Fund (SWOIX) provides one-stop shopping for foreign exposure. The 1,200-stock portfolio mixes large- and small-caps, fast-growing companies and deeply undervalued ones from more than 30 countries. The International Monetary Fund forecasts that the global economy will grow by 3.6% in 2017 and 3.7% in 2018, up from 3.1% in 2016. Despite its broad diversification, this fund has been able to outperform its benchmark index, the MSCI ACWI Ex USA Index, by an average of five percentage points annually over the past decade. Performance: 29.3% (one-year) and 3.9% (10-year). Schwab.com
Oakmark Global Fund (OAKGX) is able to shift between domestic and foreign stocks based on which group looks more attractive. Right now, the 37-stock portfolio has about half its assets in foreign companies. The managers are contrarian investors looking for cheaply priced companies with growth potential and shareholder-friendly management. Performance: 28.6% (one-year) and 6.2% (10-year). Oakmark.com
Primecap Odyssey Growth Fund (POGRX) has the flexibility to invest in small- and mid-cap growth stocks as well as large-caps, making it an intriguing option if you already have heavy exposure to large-cap growth stocks. In today’s market, investors are putting a premium on relatively fast-growing businesses, especially those with the ability to add some overseas exposure. The fund uses a patient, contrarian approach, looking for companies with strong growth potential but temporarily depressed valuations. Performance: 27.3% (one-year) and 10.7% (10-year). PrimecapManagement.com
T. Rowe Price Blue Chip Growth Fund (TRBCX) hunts for reasonably priced US blue-chip stocks that can do well even in a slow-growth economy. Stocks of large, fast-growing companies have had superior performance over companies of any other size during the past eight years, and this fund did particularly well in the 12 months through October 31, 2017. The fund favors companies that dominate their industries and recently owned many stocks in the financial, tech and industrial sectors that have strong cash flows. Performance: 34.2% (one-year) and 10.5% (10-year). TRowePrice.com
Vanguard International Growth Fund (VWIGX) holds mostly large-cap stocks and gained 41% in 2017 through October 31, thanks to strong stock-picking among technology and consumer-discretionary companies and a bet on an economic rebound in China…and because funds focused on large foreign companies are benefiting from a rare period of synchronized economic expansion in most major economies around the globe. The fund’s performance ranks in the top 10% of its category over the past 10 years. Performance: 37.5% (one-year) and 4.3% (10-year). Vanguard.com
Relatively Conservative Funds
Most investors should own stocks for growth as well as bonds to help moderate stock market drops. Balanced or allocation funds offer you stocks and bonds (or other low-risk investments) in one fund. If you’re very worried about a big market pullback or heightened volatility in the coming year, consider investing the majority of your stock portfolio in a balanced or allocation fund.
Leuthold Core Investment Fund (LCORX) has followed the same approach for nearly 25 years, using computer models to predict economic conditions and stock market trends. The fund has been about 20% less volatile than the S&P 500 in the past decade. Performance: 14% (one-year) and 4.4% (10-year). LeutholdFunds.com
Value Line Income & Growth Fund (VALIX) recently had 85% of its assets in stocks, mostly those of large companies, and the rest in cash, Treasuries and blue-chip corporate bonds. It’s been about 25% less volatile than the S&P 500 stock index in the past decade yet managed to perform within one percentage point of that index annually, on average, over 10 years. Performance: 20.8% (one-year) and 6.7% (10-year). VLFunds.com
*All performance figures, including one-year returns and 10-year annualized returns, are through November 10, 2017, unless otherwise noted.