A decade of steady corporate earnings growth and an expanding economy provided the fuel needed to produce double-digit returns among the industry’s best-performing funds.
Mutual funds and ETFs with the best 10-year returns, and at least $500 million in assets under management, posted an average gain of more than 18%, according to Morningstar Direct. Outperformance came from largely passive products heavily weighted in the tech sector. Nonetheless, long-term analysis of outliers in any ranking can be misleading, says Greg McBride, a senior analyst at Bankrate.
“The winning sectors and strategies had a common theme – technology,” McBride says. However, he adds, “what did best the past 10 years is unlikely to prevail in the next 10 years.”
When pitted against the broader market, the top-performers bested both the Dow and S&P 500 by more than 5 percentage points, Morningstar data show. For comparison, the S&P 500 posted a 13.47% gain, tracked by the SPDR Dow Jones Industrial Average ETF (DIA), while the Dow managed a similar 13.45% gain, tracked by the SPDR S&P 500 ETF (SPY). Meanwhile, the industry’s largest fund, the $823.6 billion Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), had a 10-year return of 13.44% and expense ratio of 4 basis points.
Although relatively low, the top performers carried higher expense ratios than the average fund. At 0.67%, the average expense ratio among these funds was nearly 20 basis points higher than the 0.48% investors paid on average for fund investing last year, according to Morningstar’s most recent annual fee survey, which reviewed the asset-weighted average expense ratios of all U.S. open-end mutual funds and ETFs. While fees were relatively high, McBride says they were not high enough to impact their performance.
"Strong performance in relatively narrow segments of the market was enough to outpace the returns of broader index funds,” McBride says.
Scroll through to see the 20 mutual funds and ETFs with the best 10-year returns through Aug. 28. Funds with investment minimums over $100,000 were excluded, as were ETNs, leveraged and institutional funds. Assets and expense ratios for each fund, as well as three-year daily returns, are also listed. The data is based on each fund's primary share class.
