Now that 2024 has begun, we have a clearer picture of which investments did well in 2023. And in terms of mutual funds, it was another year in the reign of tech.
According to the latest data from Morningstar Direct, the 20 top-performing mutual funds of last year — as measured by their one-year returns — were thoroughly dominated by tech stocks. Out of the top 10, eight were focused on technology companies, and four tracked the performance of the Nasdaq.
This marks a striking turnaround for tech, considering how poorly the sector did in 2022. That year — the worst for the stock market in general since 2008 — the Nasdaq dropped 35%. In 2023, it
But according to some financial advisors, this wild fluctuation is par for the course.
"Technology — and high-growth companies in general — get beat up the hardest in down years for the market as a whole and rebound the most in up years," said Joseph Boughan, the owner of
In some ways, tech's dominance is not surprising. Morningstar has also ranked the
What the 2023 data shows is that such funds don't need 10 years to show results; they can also perform well in the short term. And some wealth managers expect that to continue in 2024.
"Tech-focused funds did so well in 2023 because technology was the best-performing sector in 2023," said Noah Damsky, a principal at
Another star sector was cryptocurrency. Of 2023's top 10 mutual funds, two were in bitcoin futures contracts — which makes sense, given that the price of bitcoin rose
But not everyone thinks bitcoin futures have a future. Earlier this month, the SEC approved
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"There was surging demand for bitcoin mutual funds in 2024, as most of the big firms were buying bitcoin in anticipation of the ETF approval, and many investors did not have other great options," he said. "It is unlikely this trend will continue in 2024 because investors have more attractive alternatives now that the ETF is approved."
The better bet, Boughan said, is to invest in tech.
"For investors with risk appetite, tech-focused funds are still relevant and have good potential for growth as the adoption of AI continues in 2024," he said.
For the full list of the top 20 mutual funds of 2023, scroll through the cardshow below. All data is from Morningstar Direct and is current as of Jan. 16, 2024. (Some cards do not show 10-year annualized returns because those funds did not exist 10 years ago.)
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