THE BEST FUNDS ON THE PLANET

I know we have some aggressive growth investors in our group.  Aggressive growth investors are willing to take on a bit more risk to achieve investment returns that are above average. There are several good fund options for people seeking higher growth in their accounts.

As usual we will use the S&P 500 as the benchmark against which we will compare these higher growth funds.  We will also only be looking at growth funds that have been in existence for 20 years or more. 

Many funds can achieve high returns for shorter periods of time (three years, five years and even ten years).  Fund managers often place big bets on a small number of companies or on a specific sector or the economy (lithium batteries, artificial intelligence, etc.).  If they get lucky and these big bets payoff, they can post huge gains.

But there are very few growth funds that can guess right all the time.  Often the big gains that come when the big bets payoff are offset by big losses in other time periods when their big bets fail to deliver. 

As I have mentioned in other posts, the Nasdaq is the growth index fund.  You can expect to earn 9% to 10% per year with an S&P 500 index fund over twenty years or more.  With a Nasdaq index fund, you would be looking at annual returns of 10% to 11% per year.  The more concentrated Nasdaq-100 index fund would provide annual returns of 11% to 13% per year. 

The higher returns in the Nasdaq come mainly from a higher concentration of technology companies – software companies, semiconductor companies, etc. 

Higher growth does come with more volatility.  More volatility means that these funds decrease more when the stock market collapses.  For example, in 2022 the S&P 500 lost about 19% and the Nasdaq lost about 32%.

Fidelity offers some technology focused growth funds that perform as well as or even better than the Nasdaq over long periods of time.  The Fidelity Growth Fund is similar in makeup and performance to the Nasdaq 100. 

The Fidelity Software & IT Fund is more concentrated in technology companies than the Nasdaq and it has outperformed the Nasdaq-100 over the last 20 and 30 years (4% higher per year over 30 years). The Fidelity Select Tech fund is also more concentrated in technology companies and has performed about even with the Nasdaq-100 over the last 20 years and about 2% higher per year than the Nasdaq-100 over the last 30 years.

 The Vanguard Admiral fund and the Vanguard Information Technology fund have posted 20 year returns that are about equal to the Nasdaq-100.  When results are similar it is safer to stick with an index fund.

There is one “stock picker” fund that stands out when you look at top performing funds over the last 30 years that is not focused on technology companies.  It is called Baron Retail Partners, and it often places big bets on single companies. 

When I last checked, Baron had half of their assets invested in Tesla.  They also use leverage which means that they borrow money to invest in stocks.  These strategies add higher levels of risk to this fund.  It is too risky for me but their performance over 30 years is exceptional.  They beat the Nasdaq-100 by 3% per year over the last 30 years.

Keep in mind that there are 9,000 funds to choose from and only a handful that can compete with the best index funds like the Nasdaq.  This is why I always advise you not try to pick individual stocks.  If the highly paid, most experienced fund managers that have a large staff of analysts can’t beat the best large cap index funds, what makes you think you can?  There are less than ten people on the planet who can pick stocks well enough to beat the index funds over 20 years or more. 

If you are an aggressive investor, these are the funds for you.  You can do even better when you combine aggressive growth funds with my Market Signals product.  Market Signals keeps you 100% invested in these growth funds during bull markets and protects you against losses in bear markets.  You will need the loss protection because of the higher volatility that comes with growth funds. Gains of 15% per year are possible with this strategy compared to your current results of 6% to 7% per year. 

If you are interested in a safer and better way to invest, check out Market Signals here.

Happy Investing,

Phil

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Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.