As a general exercise, I enjoy looking back at top-performing investments to see what we can learn from them to make us better investors. Today, as I've done in years past, I want to share my research on the top-performing mutual funds of the past 10 years.
Why mutual funds? Because nearly all of us owns one in some form -- mostly likely via 401(k) or other retirement plans. In fact, according to the Investment Company Institute, 87 million individuals own a mutual fund.
The following 10 funds had incredible annualized gains, making investors quite a bit of money over the past decade. Unfortunately, there's not a ton we can learn from their success.
But I'm getting ahead of myself. Here are the funds, their returns, and some of their other key data points:
|
Fund/Ticker |
10-Year Annualized Return |
Expense Ratio |
Morningstar Category Average Expense Ratio |
Load? |
Manager Tenure |
|---|---|---|---|---|---|
|
USAA Precious Metals and Minerals |
28.9% |
1.19% |
1.41% |
None |
17 years |
|
Van Eck International Investors Gold |
28.1% |
1.43% |
1.41% |
5.75% |
13 years |
|
U.S. Global Investors World Precious Metals |
27.2% |
1.81% |
1.41% |
None |
12 years |
|
Tocqueville Gold |
27.1% |
1.34% |
1.41% |
None |
13 years |
|
ING Russia |
26.9% |
2.11% |
1.64% |
5.75% |
3 years |
|
Wells Fargo Advantage Precious Metals |
25.7% |
1.80% |
1.41% |
5.00% |
4 years |
|
First Eagle Gold |
25.2% |
1.22% |
1.41% |
5.00% |
2 years |
|
U.S. Global Investors Gold and Precious Metals |
25.1% |
1.54% |
1.41% |
None |
12 years |
|
Oppenheimer Gold & Special Minerals |
25% |
1.06% |
1.41% |
5.75% |
14 years |
|
OCM Gold Investor |
24.7% |
1.93% |
1.41% |
4.50% |
23 years |
Source: Morningstar. Returns as of March 11, 2011. For manager tenure, I took the tenure of the primary-listed manager from Morningstar.
What's striking about this chart is its uniformity -- of the top 10 performers, nine were investing in gold or precious metals. The lone outlier was Russia-focused: While it's the "R" in BRIC, Russia is not exactly a market you hear much chatter about at cocktail parties.
One obvious conclusion to draw, then, isn't very useful: You should have been in gold 10 years ago. Kidding aside, trying to find the top-performing funds of the next 10 years will be a moving target -- I'll be shocked to see gold and precious metals stacked in the 2021 list. That one sector dominates this list is a reminder of the importance of diversification. (Although if you are looking for an active fund as a way to invest in gold/precious metals, the list above should be useful as a starting point for your due diligence.)
Drilling down
In previous columns on mutual funds, I've argued that investors need to look for funds with:
- lower-than-average expenses, and
- higher-than-average manager tenures.
But in the group above, six of the 10 top performers charge load fees, the onerous sales commissions levied against investors as a way of compensating the financial advisors who sell the fund. What's more, six of the 10 also have expense ratios higher than their Morningstar category average.
The management tenure picture is rosier: An impressive seven of the 10 funds have managers who've been at the helm for at least 12 years.
Wrapping up
Nonetheless, that the majority of these funds have high expenses hasn't changed my tune. For the 87 million of us that own funds (and in particular, the subsection owning actively managed funds), investors still need to seek out:
- lower-than-average expenses, and
- higher-than-average manager tenures.
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