15 Best Mutual Funds for 2021

The universe of mutual funds can be divided in different ways. For example, you might categorize funds by their focus: Some are invested in stocks, some in bonds, some in both, and some in various combinations of asset types. Another key difference among funds is whether they're active or passive. A fund with trained analysts who study lots of securities and decide which ones to buy for their fund and when to sell them is an actively managed one. A passively managed fund, on the other hand, requires little management brainpower, because it typically just mimics an index, holding most or all of the same securities, in the same proportion. A classic example is an S&P 500 index fund, which tracks the popular index of about 500 major American companies.

So which is better for you, active or passive funds? Well, passive broad-market index funds will deliver roughly the market's average return. You can aim to do better than that with some actively managed funds, but know that, on average, very few actively managed funds outperform their benchmark indexes over long periods. Many good index funds charge very low fees, while actively managed funds can charge 1% or more of assets each year.

Here's a look at some promising funds, of the actively managed and passively managed variety. For some of the passive funds, I'll include similar exchange-traded funds (ETFs).

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