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Mutual funds are one of the most popular and reliable types of investments and with good reason. Professional management is good on its own, but the fact that mutual funds are inherently diverse (by their companies, if not their sectors) helps to insulate them from problems and ensure their ongoing success. If you're looking for the best mutual funds for 2019, here are our top choices.

How We Chose These Funds

Investing is an important part of planning for your future - and quite frankly, we wouldn't deserve your trust if we tried to hide how we selected these funds.

First, we began by looking at funds that have performed well over the last few years. As smart investors know, past performance is no guarantee of future performance - but a history of reliable performance is nonetheless compelling.

However, performance was not the only criteria we used. Market factors often influence mutual funds - for example, healthcare had a pretty lousy year in 2016, but many people agree it was due for a correction anyway. Thinking in the long-term, healthcare is still a winner, and a mutual fund with that focus made this list.

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Next, we decided to diversify this list by focusing on different holdings as well as different parts of the economy. Few things are better for reducing your risk than spreading your investments across as much of the market as possible.

After that, we looked for funds with a low expense ratio (which means more money stays in your pockets). Any expense ratio below 1.50% is acceptable for a mutual fund, but we wanted to go further than that and ensure each of our recommendations was below 1%.

Finally, we trimmed the final list to focus on the mutual funds we felt were most likely to be worth holding for more than one year. You can always exit early if you want, but if you'd prefer to leave things alone, these funds are a good choice.

Our Top Mutual Funds For 2019

Here are our choices for 2019, split into the following categories:

  • Balanced Funds offer a mix of stocks and bonds, and are also known as blended funds. While they rarely show substantial returns, they also tend to avoid significant losses, offering a steady rate of return regardless of the market's conditions.
  • Stock Funds and Bond Funds are significantly more volatile than Balanced Funds, but they also tend to offer higher returns at times. You can take on a lot of risk with these funds, or try to get a modest profit by taking the earnings and putting them into a balanced fund.

Balanced Fund #1: Vanguard Balanced (VBINX)

Vanguard has many of the best mutual funds on the market - enough to earn several places on this list, in fact. If you're looking for steady, long-term reliability on your investment, it's hard to beat out this particular fund. The allocation of its assets can change a bit as things are bought and sold, but the Vanguard Balanced fund usually has about two-thirds in stocks and one-third in bonds.

This gives it a solid base of reliable returns that still allows for excellent performance when stocks are beating bonds, as they are in 2019. If you don't know anything about investing and want the safest choice you can get, we strongly recommend this fund over any other on this list.

This fund has a minimum initial purchase of $3,000 and an expense ratio of 0.22%.

Balanced Fund #2: Hussman Strategic Total Return (HSTRX)

This fund rarely has the best returns when the market is on the upswing, but it still tends to offer returns that significantly surpass inflation in the long-term - while minimizing losses during downturns. Many people feel that this fund is closer to being a hedge fund than a mutual fund, but it's still reasonably attractive to new investors.

This fund has a minimum investment of $1000 - which is much more accessible than the Vanguard Balanced Fund - but it also has a higher expense ratio at 0.69%. This is still a reasonable expense ratio, but it will make it a little harder to earn enough to switch to another fund if that's what you're trying to do.

Stock Fund #1: Vanguard 500 Index (VFINX)

While there are many theories on investing, many people suggest a large-cap fund filled with stocks as a core part of your investments. Vanguard's 500 focuses on some of the best stocks in the market, and for 2019, we think this will be better than small-cap funds.

There's a reasonable chance of a significant correction occurring by the end of 2019, and total index funds that include a lot of smaller companies could see significant declines during this period. Bigger companies are more likely to weather the storm - and more likely to return to their previous level.

This fund has a minimum initial purchase of $3,000, but with an expense ratio of just 0.16%, it's one of the most affordable funds to hold over an extended period. If you'd like to buy a lot of stocks, this fund is an excellent base for an investing strategy.

Stock Fund #2: Fidelity Select Consumer Staples (FDFAX)

Large-cap funds focused on the top of the market aren't the only way to protect yourself from the bear market we're likely to see in the next few years. A solid alternative here is Fidelity's Consumer Staples index.

If you're not familiar with the term, "consumer staples" refers to the manufacturers and distributors of food, drinks, and tobacco products, as well as certain types of nondurable housing and personal products. The demand for these products is "noncyclical," which in real terms means people are going to keep buying them regardless of the market conditions.

There's some sense to this. After all, even if the economy is terrible, people need to eat. If the market gets to the point where even consumer staples are in total free-fall, there are bigger things to worry about than how your retirement is doing.

This option from Fidelity has a reasonable minimum investment at $2,000, with an expense ratio of 0.77%. That's a little higher than we'd like, but it's acceptable.

Stock Fund #3: Vanguard Energy (VGENX)

Energy is one of the most exciting sections of the market. While the source of energy may change, such as the switch from coal to greener options, the general demand for it remains strong and may continue to rise as more and more machines are used to automate parts of the economy.

Energy is also a 'raw' sector - that is, it focuses on managing and using raw materials. These sectors are generally steady in the face of market changes, especially in the later stages of a business cycle. Like most balanced funds, this sector probably won't see huge gains, but steady demand means steady returns.

This fund has a minimum investment of $3,000 and an expense ratio of 0.37%.

Stock #4: Vanguard Healthcare (VGHCX)

If it seems like Vanguard shows up a lot, there's a reason for that - it's very good at creating and managing mutual funds. Healthcare is one of the most exciting sectors (along with energy), and despite what you've heard in the news lately, we think a fund focused on this sector is still worth investing in long-term.

Two factors are driving this decision. First, biotechnology is continuing to perform well and will likely keep doing so for at least the next few years. Second, the population is aging, which means more people overall will need care from different parts of this sector. This includes various medical devices, pharmaceuticals, care facilities, and so on.

In many ways, the healthcare sector resembles the consumer staples sector. As long as programs like Medicare exist, we can expect a significant portion of the population to need - and receive - healthcare. That insulates it from market downturns while still providing substantial (and likely growing) returns.

This fund has Vanguard's regular initial investment of $3,000 and a fractionally-lower expense ratio of 0.36% (when compared to the Energy fund). If you're trying to pick between the two, we suggest Energy for security and stability and Healthcare for better returns.

Stock Fund #5: Hennessy Japan Small Cap Investor (HJPSX)

Feel like investing in foreign stocks? If so, Hennessy's Japan Small Cap Investor fund is particularly worthy of your attention. This is a small-cap fund balanced between value and growth that aims to profit from stocks in the bottom 15% of market capitalization. It's mainly focused on companies with business models well-tested by time, and its Asia-based managers have an intimate understanding of the local market.

As Hennessy itself is happy to explain, this stock fund actively seeks out companies that have little debt, a lasting competitive advantage, a high return on their equity, a predictable and sustainable earnings growth that beats the average, and steady cash flow. It may not focus on the most significant profits, but the intelligent management has turned this into an award-winning fund worthy of a second (and third) look.

Bond Fund #1: Loomis Sayles Bond (LSBRX)

Bonds can be tricky, and we expect that bonds are going to continue to see falling prices. This fund has a bolder strategy than most with its "go anywhere" style. In more practical terms, this means the fund manager is willing to look at both foreign and domestic options to get the best returns at any given time.

It's worth noting that this fund can be quite volatile in the short-term, especially when the market hits a negative environment. However, it tends to average good returns when held for at least three years, so we recommend buying when you think prices are about at their lowest and keeping it for longer than other funds.

The minimum investment is an attractive $2,500 - less than Vanguard funds - but it has the highest expense ratio on this list at 0.91%. To clarify, this is still a reasonable expense ratio overall - all things considered, this remains an affordable fund to hold. Pick a different fund, though, if you'd prefer to avoid fees.

Buyer's Guide

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Only you can determine how much risk you're willing to take on when you invest in mutual funds. If you don't know what the right balance between growth and risk is, it's time to talk to an investment advisor who can see where you are, where you'd like to be, and what the most realistic way of reaching your goals is.

Since each person is in a different situation, we can't give you personalized advice. However, we can suggest a few things that can minimize your risks as you decide between the best mutual funds for your needs.

First, some of your investments should be in safe, reliable funds. We know how bad it feels when it seems like you missed an opportunity, but every opportunity comes with its risks. Most people sleep better at night if they can get steady, predictable returns.

Second, you should always diversify your investments. Don't put all of your money in one fund, regardless of how much you like it. Investing in different sectors helps insulate you from market shocks while still allowing you to benefit when the overall economy is growing.

Finally, remember that mutual funds tend to perform best when you buy and hold them for at least one year, and preferably two or more. We don't recommend forgetting the investment, precisely, but you shouldn't buy mutual funds to capitalize on short-term changes in the stock market.

Disclaimer: While we have made every reasonable effort to suggest the best mutual funds for 2019, nobody can guarantee their performance, and we cannot take responsibility for the results of your decisions. Ultimately, only you can decide if the risk of an investment is acceptable.

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