Best Funds To Own In 2021

Charles Bolin profile picture
Charles Bolin
2.49K Followers

Summary

  • Over 300 no load mutual funds available to small investors, nearly 200 exchange-traded funds, and over a dozen closed-end funds representing 120 Lipper Categories are ranked.
  • The funds are ranked based on Risk, Risk Adjusted Performance, Momentum, Quality, Yield, and Consistency. They are divided into 15 investment buckets for risk, exposure, yields and trends.
  • The funds are reported by short-term performance including three-month returns and trends, ten-month moving average, fund flows, maximum draw downs, and yield.
  • The data is presented to build a storyline about whether a fund should or shouldn't be included in a portfolio.

With the uncertainties of recessions and COVID, I look for funds that perform well on a risk-adjusted basis following a bucket strategy to match withdrawal needs. Over 500 funds are selected for consideration using Mutual Fund Observer screens based on risk-adjusted returns, MFO Risk, MFO Rating, assets under management, and expenses. The mutual funds represent Fidelity (77), Vanguard (64), T. Rowe Price (29), Charles Schwab (19), PIMCO (10), American Century (8), and 37 more fund families.

MFO Great Owl Classification, Morningstar ratings, Fidelity Fund Picks, Schwab Select lists, and MFO Profiled funds were factored into selection. In other words, the funds are mostly quality funds with long histories, although some funds with shorter lives are included. Most funds have at least $100M in assets. The average age of the funds that I track is 17 years.

My rating system was updated and includes Risk (i.e., Ulcer Index, bear market performance), Returns (i.e. Martin Ratio, six-month returns), Quality (i.e. Fund Family Rating, Valuations, Bond Quality, expenses, Composite Ratings), Momentum (i.e. three-month trends and returns, fund flows), Yield, and Consistency (percent average annual returns or better over past 13 years).

The funds are broken into 15 investment buckets including, safety, income, sectors, international exposure and trends. Short-term data is presented to represent how the funds are doing after the correction earlier this year and low interest rate environment.

The funds are intended for investors that are in or approaching retirement. All investments involve some risk such as not meeting financial goals, inflation, and loss of capital. These funds are intended to be lower risk for the investment category that they are in. With the exception of trending funds at the end of the article, they are arranged from safest investment bucket with respect to loss of capital to the more risky. The final section includes funds that are trending, and are separated with respect to the ten-month moving average.

Storyline

I like to have a storyline for each investment that I buy or sell. Why should I own it or sell it now? Some funds are buy and hold. Allocations to others may be adjusted according to the business cycle.

There are five top rated funds for each of the 15 following investment buckets. Rank refers to my rating system from 1 (worst) to 100 (best). Maximum Drawdown (MaxDD), Annualized Returns (APR), and ten-month Smoothed Moving Average (SMA10) refer to the past two years. Three-Month Trends and Returns and Money Flows are shown to represent how funds are doing in the current investment environment.

Bucket #1: Safety (Emergency Funds)

In this low yield environment, safe bond funds have low returns. The funds in Table #1 have positive returns over the past three months, positive trends, money flows into the funds as investors seek safety, and yields near 2%.

Table #1: Safety

Bucket 1: Safety
Name Symbol Rank MaxDD APR Rtn 3 Mon Trend Flow Yield SMA10
PIMCO GNMA and Gov Sec PDMIX 100 -0.1 6.7 0.7 0.3 5.2 2.6 3.7
Baird Interm Bond BIMIX 99 -1.7 7.8 0.4 0.4 0.8 2.2 3.5
Vanguard Short-Term Fed VSGBX 99 -0.2 4.5 0.3 0.1 2.2 1.4 2.5
Vanguard Core Bond VCOBX 99 -1.1 10.8 1.1 0.8 4.5 1.9 5.2
Schwab Short-Term Bond SWSBX 98 -0.1 5.2 0.1 0.1 1.4 1.7 2.6

Source: Author Using Mutual Fund Observer

Bucket: Income

The funds in Table #2 are intended for investors (retirees) who are seeking safety with higher yields. For the most part, they are positive returns, positive trends, money inflows and higher yields than those in the previous table. They have slightly higher risk of drawdowns.

Table #2: Funds for Safety with Income

Income with Safety
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Guggenheim Tot Rtn Bond GIBIX 100 -1.1 9.9 2.3 1.5 2.7 2.5 6.7
Vanguard Interm-Term Corp Bnd VCIT 99 -7.2 12.1 1.5 1.2 3.5 2.7 2.2
Columbia Dvrsfd Fixed Inc Alloc DIAL 99 -5.5 11.0 1.6 1.6 8.3 2.7 1.7
PIMCO Mort-Backed Sec A PMRAX 98 -1.0 5.9 0.8 0.3 -2.0 2.6 2.2
First Trust TCW Oppor Fixed Inc FIXD 96 -1.1 9.9 0.8 0.6 5.5 2.0 4.3

Source: Author Using Mutual Fund Observer

Bucket: International and Global Bonds

The funds in Table 3 should benefit if the dollar continues to fall. Emerging market bond funds generally contain more risk than developed countries depending upon quality and duration.

Table #3: Global and International Bond Funds

Global & International Bonds
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Vanguard Emerg Mrkt Bond VEMBX 98 -11.8 15.6 2.5 2.6 7.4 3.5 2.0
Vanguard Total Intern Bond VTABX 98 -2.5 6.6 1.5 0.3 -0.1 3.2 0.6
PIMCO Intern Bond (US Dol-Hdgd) PFORX 96 -3.7 6.6 2.1 0.6 1.1 5.8 0.7
iShares Core Intern Agg Bond IAGG 96 -2.2 6.7 1.4 0.3 1.6 2.0 0.8
Fidelity Series Intern Credit FCDSX 96 -8.0 11.1 2.8 1.6 0.0 2.9 0.2

Source: Author Using Mutual Fund Observer

Bucket: Municipal Bonds

Table #4 contains municipal bond funds. Returns and trends are relatively flat. Inflows are positive and yields are moderate. The biggest attraction is the tax advantage.

Table #4: Municipal Funds

Municipal Bond
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
IQ MacKay Muni Insured ETF MMIN 100 -4.1 8.1 1.4 1.0 26.0 2.2 1.9
Baird Core Interm Muni Bond BMNIX 98 -3.6 6.3 1.1 0.7 2.8 2.1 1.0
Hartford Tax-Aware Bond ETF HTAB 97 -2.8 7.2 0.7 0.6 5.8 1.5 1.7
Baird Short-Term Muni Bond BTMIX 92 -1.8 3.8 0.6 0.2 5.2 1.6 0.8
Vanguard Interm-Term Tax-Ex VWITX 92 -4.3 6.3 1.0 0.8 -0.8 2.3 0.6

Source: Author Using Mutual Fund Observer

Bucket: Inflation

The iShares Gold Trust ETF is shown as a baseline for inflation resistant funds. It has had negative returns over the past three months, and is still much higher than its ten-month moving average. Inflation protected bonds generally are not increasing in value and yields are low. It may be too early to be adding inflation protected bonds.

Table #5: Inflation Protected Bonds, Gold, Commodities

Inflation Protected Bonds, Gold, Commodities
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Baseline: iShares Gold Trust IAU 63 -10.3 20.0 -10.0 -4.2 0.2 0.0 12.7
Schwab US TIPS ETF SCHP 95 -1.8 9.3 0.1 0.5 4.2 1.3 4.4
Schwab Treas Infl Prot Sec SWRSX 94 -1.7 9.3 0.1 0.5 2.8 1.3 4.3
Vanguard Inf-Prot Sec VAIPX 93 -1.3 9.2 0.2 0.5 -0.9 1.4 4.4
Fidelity Inf-Prot Bond FIPDX 91 -1.3 9.3 0.1 0.6 2.7 0.3 4.3
PIMCO 15+ Year US TIPS ETF LTPZ 90 -4.4 21.6 0.9 1.4 19.4 1.9 10.5

Source: Author Using Mutual Fund Observer

Bucket #2: Conservative (Withdrawals 1 to 2 years)

Table #6 may be of interest to investors seeking some exposure to stocks or higher bond returns for moderate safety. Returns and trends are moderate, but money has been flowing out of these funds. With COVID cases rising, this may reverse.

Table #6: Conservative Funds

Bucket 2: 1 to 2 Years
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Baird Core Plus Bond BCOIX 97 -3.3 10.0 1.0 0.8 0.3 2.6 3.5
Vanguard Wellesley Inc VWIAX 93 -8.6 10.6 3.7 3.3 -6.7 2.8 -0.5
Metropolitan West Tot Rtn Bond MWTRX 89 -1.4 9.6 0.8 0.7 0.5 1.6 4.1
Vanguard Target Retire Inc Inv VTINX 87 -6.6 9.9 2.6 2.5 -5.3 2.0 1.1
iShares Aaa - A Rtd Corp Bnd QLTA 85 -3.7 12.0 1.6 1.4 -6.8 2.4 3.8

Source: Author Using Mutual Fund Observer

Bucket: Alternatives

The following alternative funds exhibit moderate safety, positive returns and trends with varying yields. Alger Dynamic Opportunities (SPEDX) is too far above its ten-month moving average to interest me. T. Rowe Price Multi-Strategy Total Return (TMSRX) is one of my holdings. Columbia Adaptive Risk Allocation (CRAZX) is available through Vanguard and other investor share classes are available at other brokers.

Table #7: Alternative Funds

Alternatives
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
T. Rowe Price Multi-Strat Tot Rtn TMSRX 99 -4.7 8.9 2.4 1.2 10.8 2.3 4.1
Carillon Reams Unconst Bond SUBFX 96 -3.0 9.0 1.9 1.5 0.2 2.3 4.5
Columbia Adaptive Risk Alloc CRAZX 91 -7.1 10.6 1.8 3.6 0.8 2.5 0.0
Absolute Conv Arbitrage ARBIX 84 -3.1 7.2 2.0 1.1 6.2 0.4 2.5
Alger Dynamic Oppor SPEDX 83 -6.9 23.0 7.5 3.7 7.4 0.0 15.7

Source: Author Using Mutual Fund Observer

Bucket #3: Moderate Risk (Withdrawals 3 to 4 years)

Columbia Thermostat (COTZX, CTFAX) recently changed its thresholds for allocation to equities and offers less downside protection than previously. It has attracted followers and is above its ten-month moving average. It remains one of my holdings as are Fidelity Multi-Asset Income (FMSDX) and Vanguard Star (VGSTX).

Table #8: Moderate Funds

Bucket 3: 3 to 4 Years
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Columbia Thermostat COTZX 90 -2.4 20.5 3.5 3.6 3.6 1.6 13.7
T. Rowe Price Capital Appr PRWCX 90 -13.7 17.1 7.4 5.6 0.4 1.3 0.2
Fidelity Multi-Asset Inc FMSDX 89 -10.9 15.7 4.3 4.9 10.7 3.3 2.2
Strategy Shares NASDAQ 7 HANDL HNDL 88 -9.3 12.4 2.0 2.9 44.3 6.6 1.5
Vanguard Star VGSTX 84 -13.2 16.8 6.6 6.0 -9.9 1.7 2.4

Source: Author Using Mutual Fund Observer

Bucket #4: Aggressive (Withdrawals 4 to 5 years)

The S&P 500 (SPY) is shown as a baseline fund for comparison purposes. Convertible bonds are too high above their ten-month moving average for my taste. Amplify CWP Enhanced Dividend Income ETF (DIVO), as well as VictoryShares US EQ Income Enhanced Volatility Wtd ETF (CDC), may offer the opportunity to buy on dips during the coming year.

Table #9: Aggressive Funds

Bucket 4: 4 to 5 Years
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yld SMA10
Baseline Fund: SPDR S&P 500 SPY 65 -19.5 16.7 3.9 6.0 4.7 1.6 -1.0
SPDR Bloomberg Barclays Conv Sec ETF CWB 93 -16.3 28.6 10.4 8.8 2.1 2.2 10.2
iShares Conv Bond ETF ICVT 93 -14.5 32.0 11.0 9.4 15.1 1.2 14.1
Fidelity Conv Sec FCVSX 81 -12.9 27.6 8.9 8.1 0.0 1.8 8.7
Amplify CWP Enh Div Inc ETF DIVO 77 -17.4 12.0 5.3 5.1 18.6 4.6 -1.7
VictoryShares US EQ Inc Vol Wtd ETF CDC 77 -15.2 9.0 8.7 7.0 0.2 2.6 -0.3

Source: Author Using Mutual Fund Observer

Bucket: Sectors

Of the sector funds, Fidelity Telecom & Utilities (FIUIX) shows some recovery and is still well below its ten-month moving average.

Table #10: Sector Funds

Sector
Name Symbol Rank MaxDD APR Rtn 3 mon Trend Flow Yield SMA10
T. Rowe Price Health Sciences PRHSX 75 -13.4 19.6 10.6 6.3 0.4 0.1 9.5
Fidelity Select Health Care Portf FSPHX 73 -11.0 19.0 5.8 4.3 0.9 0.3 8.2
iShares US Cons Goods ETF IYK 65 -19.0 20.3 6.5 7.0 1.2 1.6 1.6
Fidelity Telecom & Utilities FIUIX 63 -19.1 7.7 8.3 5.2 -0.9 2.4 -10.5
Invesco Financial Preferred ETF PGF 60 -10.0 9.7 2.0 1.5 9.8 5.0 -1.1

Source: Author Using Mutual Fund Observer

Bucket: Global and International Equities

I like the Global and International Equities because they may benefit if the dollar continues to fall, returns and trends are strong, and they are well below their ten-month moving average.

Table #11: Global and International Equities

Global & International Equity
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Vanguard Intern Div Appr ETF VIGI 78 -18.8 15.6 7.8 6.3 0.7 1.6 -2.8
Vanguard ESG Intern Stock ETF VSGX 77 -22.9 11.9 8.5 7.1 5.1 1.8 -4.8
Vanguard Intern Div Appr VIAAX 75 -18.8 15.5 7.8 6.3 0.7 1.6 -2.8
Fidelity Series Intrinsic Oppor FDMLX 75 -26.5 7.1 12.0 8.9 -2.5 2.3 -5.6
T. Rowe Price Global Stock PRGSX 70 -16.6 34.0 12.3 9.2 2.6 0.2 12.4

Source: Author Using Mutual Fund Observer

Bucket: Trending Funds:

The Trending Categories represent more opportunities. I don't care for convertible bonds because they are too high above their ten-month moving average. The other funds in Table #12 have strong returns and trends, moderate to higher risk, and are below their ten month moving average. In researching these funds, the Vanguard ESG International Stock ETF (VSGX) peaked my interest.

Table #12: Trending Funds

Trending: Funds Trending Up with Money Inflows
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
iShares Conv Bond ETF ICVT 93 -14.5 32.0 11.0 9.4 15.1 1.2 14.1
Amplify CWP Enh Div Inc ETF DIVO 77 -17.4 12.0 5.3 5.1 18.6 4.6 -1.7
Vanguard ESG Intern Stock ETF VSGX 77 -22.9 11.9 8.5 7.1 5.1 1.8 -4.8
First Trust Water ETF FIW 58 -20.8 20.9 15.1 8.8 4.5 0.5 -4.0
iShares Edge MSCI USA Qual Fact ETF QUAL 54 -19.4 17.5 4.9 6.3 15.4 1.5 -1.4

Source: Author Using Mutual Fund Observer

Table #13 is for investors who like to buy when a fund crosses above its 200-day moving average. These funds represent moderate risk, and have strong short-term returns and trends, with positive inflows.

Table #13: Funds Just Crossing the Ten-Month Moving Average

Crossing: Funds just above the 10-Month Moving Average and Recovering
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Fidelity Series Intern Credit FCDSX 96 -8.0 11.1 2.8 1.6 0.0 2.9 0.2
T. Rowe Price Capital Appr PRWCX 90 -13.7 17.1 7.4 5.6 0.4 1.3 0.2
BlackRock Strat Inc Oppor Portf BASIX 73 -6.7 6.5 2.7 1.9 2.0 2.4 0.0
iShares Core Mod Alloc ETF AOM 68 -9.0 10.4 2.7 3.1 4.6 2.2 0.1
T. Rowe Price Retire Balanced TRRIX 53 -11.0 10.6 3.4 3.4 0.0 1.4 0.0

Source: Author Using Mutual Fund Observer

For investors who want to fish the bottom of the funds, Table #14 contains moderately risky funds that are still recovering and are well below their ten-month moving average.

Table #14: Funds Below the Ten-Month Moving Average

Bottom: Funds Below the 10-Month Moving Average and Recovering
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Vanguard ESG Intern Stock ETF VSGX 77 -22.9 11.9 8.5 7.1 5.1 1.8 -4.8
Schwab US Mid-Cap SWMCX 70 -27.1 14.6 12.3 9.3 0.6 1.3 -6.2
Columbia Div Inc GSFTX 64 -19.4 11.0 5.6 6.1 2.2 1.8 -6.0
FlexShares Morningstar Dev Mrkt ex-US Fact Tlt TLTD 59 -27.6 6.4 9.6 9.2 0.0 2.9 -12.0
First Trust Water FIW 58 -20.8 20.9 15.1 8.8 4.5 0.5 -4.0

Source: Author Using Mutual Fund Observer

Table #15 shows funds that have negative three month returns and trends and money outflows. They are well above their ten-month moving average and it appears investors may be reducing holdings.

Table #15: Downward Trending Funds

Downward: Funds with downward 3 Month Trend & Return, and Outflows
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Fidelity Interm Gov Inc FSTGX 84 -0.7 5.9 -0.4 -0.1 -1.6 1.2 3.8
Fidelity Gov Inc FGOVX 75 -1.6 7.7 -0.3 -0.1 -1.3 1.2 4.7
Fidelity Interm Treas Bond FUAMX 62 -1.8 9.5 -0.5 -0.1 -0.5 1.6 6.1
Invesco S&P 500 Dwnsd Hdgd ETF PHDG 34 -6.2 9.0 -6.2 -1.1 -9.1 1.1 11.5
SPDR Portf Interm Treas ETF SPTI 29 -1.0 8.1 -0.4 -0.1 -2.5 1.0 5.3

Source: Author Using Mutual Fund Observer

Closing

What we believe are the best funds for 2021 is based largely upon our views of the recovery, global economy, and impact of COVID. The funds in this article offer readers many quality choices.

Table #16 contains the lowest ranked funds in my portfolio. The storyline is that I own the three international funds expecting a lower dollar and short-term performance is good, Amplify BlackSwan Growth & Treasury Core ETF (SWAN) to reduce risk, Hussman Strategic Total Return Fund (HSTRX) and Cambria Tail Risk ETF (TAIL) for downside protection.

Table #16: Lowest Ranked Funds in Portfolio

Evaluation of Lowest Ranked Funds in Portfolio
Name Symbol Rank Max DD APR Rtn 3 Mon Trend Flow Yield SMA10
Fidelity Global Credit FGBFX 61 -9.6 11.4 2.4 1.6 3.7 2.3 0.2
Amplify BlackSwan Grwth & Treas SWAN 45 -5.0 16.2 0.8 3.1 0.4 0.6 5.1
Hussman Strat Tot Rtn HSTRX 41 -2.0 12.7 -1.4 0.0 0.7 0.7 7.4
Vanguard Global Wellington VGWAX 30 -15.6 10.5 5.1 5.5 -11.2 1.6 -4.1
Vanguard European Stock VEUSX 18 -25.7 9.3 6.8 8.4 -6.2 2.1 -9.6
Cambria Tail Risk ETF TAIL 5 -14.0 1.7 -3.5 -2.3 0.0 0.8 11.1

Source: Author Using Mutual Fund Observer

As a result of writing this article, I made no changes to my portfolio. I did set up a system that makes it fast and easy to track great funds.

Stay safe and enjoy the Holidays.

This article was written by

Charles Bolin profile picture
2.49K Followers
I use Mutual Fund Observer MultiSearch as the primary tool to analyze and rank funds based on risk, momentum, quality, income, and consistency factors. I classify nearly 700 funds each month by investment buckets for risk and trends. I began contributing to the MFO monthly newsletter in 2019.I am an individual investor and engineer with an MBA nearing retirement.
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Disclosure: I am/we are long TMSRX, VTABX, COTZX, FMSDX, VGSTX, VWIAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an engineer with an MBA nearing retirement and not an economist nor an investment professional. The information provided is for educational purposes and should not be considered as advice. Investors should do their due diligence research and/or use an investment professional. In September 2019, I began contributing to the Mutual Fund Observer monthly newsletter.

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