If a bull market must continually climb a wall of worry, then the current bull, which started more than six years ago, should be on the brink of exhaustion. Consider a few of the concerns that this bull has had to contend with lately: expectations that the Federal Reserve will soon raise interest rates for the first time since 2006; diminished corporate earnings because of sluggish economic growth, a strong dollar and the collapse of oil prices; and, in addition to the usual anxieties about geopolitical turmoil, the expanding threat of militant Islam and the unknown ramifications of a possible Greek exit from the eurozone. Phew!
Although the stock market showed signs of fatigue in the first half of 2015, with Standard & Poor's 500-stock index returning a mere 1.2% (including dividends), the bull refused to roll over. For the entire 12-month period through
Regardless of the size of the companies that funds invest in, the ones that focus on growth stocks clobbered the funds that seek bargains. The key to success over the past year, in particular, was owning a lot of health care stocks--and few, if any, energy stocks. Over that period, health care stocks in the S&P 500 gained 22%, while the index's energy stocks surrendered 24%. The amount by which health beat energy was even wider among small-cap and mid-cap stocks.
We show the top-performing mutual funds over various periods in 11 categories. The list includes only funds with modest minimum investment requirements and excludes leveraged and inverse index funds.
Midsize-company stock funds
A healthy dose of biotech boosts the winners.
Tocqueville Opportunity has changed its stripes over the years. As recently as 2007,
Small-company stock funds
Small caps start to catch up to their bigger brethren.
Small-capitalization stocks showed signs of life in the first half of 2015, with the Russell 2000 index beating the S&P 500 by 3.5 percentage points. As in the other domestic categories, funds that focused on growth stocks shined brightest. Driehaus Micro Cap Growth, run by a firm that helped originate momentum investing, recently had 39% of its assets in health care stocks and 22% in technology. And as its name implies, its holdings are really small; the median market cap is
Hybrid funds
They're great for tamping down the risk of an all-stock fund.
In the midst of a bull market, stock-heavy target-date funds have an edge in this category, which includes balanced funds, asset-allocation funds and others that dilute their stock holdings with bonds and cash. One fund that's loaded with cash--38% of assets--is Kiplinger 25 member FPA Crescent; comanager
Large-company foreign stock funds
Funds that hedge against currency risk lead the way.
The big story in foreign stocks this past year was the strong dollar. Over that period, the MSCI EAFE index, which tracks large-company stocks in developed markets, slipped 3.8%. But the version of the EAFE that hedges against currency swings rose 11.7%. That's one reason
Small- and midsize-company foreign stock funds
Despite the mediocre results, the little guys win the overseas race.
When it comes to foreign stocks, smaller did ever so slightly better than bigger over the past year. But that's not much to brag about. The MSCI EAFE Small Cap index lost 0.5% over the past 12 months, compared with a 3.8% dip in the large-company EAFE index. T. Rowe Price International Discovery and Fidelity International Small Cap Opportunities have delivered above-average returns with below-average volatility over the long haul. And both charge below-average fees. Also worth a look is
Global stock funds
Overseas investments hurt returns of funds that can go anywhere.
Global funds can invest in the U.S. and overseas--and that has been a problem because of the sluggish performance of most foreign bourses. Artisan
Diversified emerging-markets funds
Their performance hasn't lived up to the hype.
Developing nations are grappling with falling commodity prices, geopolitical turmoil and slowing economic growth. Performance varies widely among countries, but the group overall has struggled in recent years. Harding Loevner Emerging Markets, a member of the Kiplinger 25, takes a conservative approach, scouting companies with strong balance sheets and a competitive edge.
Regional and single-country funds
Two developing giants dominate the one-year winners list.
The single-country-fund story has lately been all about
Sector funds
It's a clean sweep for health care funds.
It's no surprise that health care funds dominate this list. What's shocking is that a health fund occupies every slot over every period. If you invest in sector funds to spice up your portfolio, you must decide whether you want to stick with what's been working or move to other, presumably cheaper, groups. If you want to play the hot hand, buy Fidelity Select Biotechnology, a pure play on rapid scientific advances in medicine. For a more diversified approach, consider Fidelity Select Health Care. A more offbeat health fund choice is Fidelity Select Medical Delivery, which holds insurers, drug distributors and health-services providers. If you're a contrarian, consider Vanguard Energy. And a good choice for investing in property stocks is Fidelity Real Estate Investment Portfolio. Just don't look for the last two on this year's winners lists.
Alternative funds
Even in this category, a health care fund rises to the top.
Alternatives include a grab bag of funds that own nontraditional asset classes or engage in unusual strategies. The best performer over the past year was--surprise--a fund that invests in health care stocks. As its name suggests, Turner Medical Sciences Long/Short owns some stocks the old-fashioned way and sells others short, betting on their prices to fall. Both the stocks it owns and the stocks it sells short are in health care. As is common in this group, fees are high. Turner's annual expense ratio is 3.60%, a figure that includes interest charges and other costs involved in selling short. Excluding those shorting costs, the expense ratio is a still-high 2.15%. Check out TFS Market Neutral, which seeks to minimize correlation with the U.S. stock market. The fund has had only one down year since its 2004 launch.
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Manuel Schiffres is executive editor at Kiplinger's Personal Finance magazine.