7 'Category Killer' Funds You Can't Miss
02/23/2012 10:15 am EST
Don't mess about with mediocrity when it comes to buying and holding funds—buy the best and hold the best, writes Richard Moroney of Dow Theory Forecasts.
Investors should not waste time holding middling mutual funds. We don’t. The Forecasts cuts bait if a fund consistently trails its peer group and scores poorly in our fund-rating system.
To make the cut, the US stock funds needed to rank among the top 50% of their respective categories over the last one- and five-year periods based on total return. To uncover consistent winners, we looked for funds that outperformed peers in at least three of the last five calendar years.
Finally, we screened for funds with below-average expenses that score above 80, ranking them among the top 20% of their category.
Wells Fargo Advantage Discoveryranks among the top 12% of its peer group for three-, five-, and ten-year total return. Boasting an impressive fund score of 91, the fund invests primarily in midsized companies with a growth slant. The fund is up 13% so far in 2012.
Vanguard Selected Value, which earns a solid fund score of 81, held 64 names on December 31, with financials representing 28% of the portfolio, followed by industrials at 10%. The fund ranks among the top one-third of midcap value funds for five- and ten-year performance. The annual expense ratio of 0.47% is below the category average of 1.38%.
Other category killers include: