Morningstar Senior Analyst Russel Kinnel has released his top five mutual funds for 2005.
Kinnel chose the funds based on management, strategy and experience. Each of the funds claims to have managers with the most experience. The ranking is based on how likely he would be to invest in the fund today. Funds with expense ratios above 1.5% are not considered and Kinnel admits that initial investment in some of his top funds can be expensive.
The first fund is Vanguard Primecap Core fund.
"This fund is clearly compelling as it has a stable, outstanding management team in place and low costs to boot," Kinnel said. "Primecap is more focused on secular growth. With an expense ratio of 0.75%, it looks tough to beat."
Next up is the Champlain Small Company fund, which is attractive because of its "strong management teams that generate solid returns on capital," Kinnel said. But there's a downside to the fund, he said, which is its 1.40% expense ratio.
Then there's the Presidio Fund, where manager Kevin O'Boyle "hunts in the bargain bin by searching for companies that have suffered earnings disappointment yet produce solid returns on invested capital." But, once again, at 1.50%, the expense ratio is high.
The Fidelity Strategic Real Return fund holds the next place.
"Fidelity has an outstanding bond group, so this all-in-one fund is certainly intriguing."
Last but not least is the PIMCO Fundamental IndexPLUS Total Return fund. Kinnel said, "It tracks the RA Fundamental 1000, which is weighted on fundamental factors rather than market capitalization. The end result is an index that is lower in market cap and more value-like than the S&P 500." Kinnel is concerned, however, with the fact that trading costs for PIMCO are high. The Class A and D shares charge 1.15%, which is a lot if compared with the competition that offers similar index funds at 0.09% and 0.10%.