Every year Money Magazine puts together its list of the seventy best mutual funds and then breaks them down into actively managed, index, ETFs and target retirement funds. I feel that by analyzing this list you can come away with some valuable information on which brokerage is right for you based on the performance of their funds.
Actively managed funds:
Of the seventy funds, forty-three reside in the actively managed category. Is this a vote for actively managed funds over index funds? Hardly, this is probably the case because actively managed funds are “sexier” and that there simply are more of them. The one thing to note is that there are a lot of funds from a lot of different places populating this list and it shows that competition in the actively managed fund category is (as it always has been) hot. Some notables I saw were that T. Rowe Price leads the pack with six with American Funds and Vanguard both holding four spots.
Fidelity and Vanguard own this list and they’ve owned it for a long time. Of the twelve funds listed, Vanguard runs nine and Fidelity runs the remaining three. The reason this is the case is because index funds require little management and thus will have rock bottom fees and I don’t think anyone can compete with the scale of operations of these two companies.
Winner: Vanguard by the numbers but Fidelity is just as good.
This list is less important because ETFs are traded like stocks and so having an account at the brokerage that runs them gives you no added advantage (it can be a disadvantage in the case of a brokerage like Vanguard – it costs significantly more to execute a stock trade there than elsewhere). That being said, Vanguard holds five of the thirteen spots, iShares (run by Barclay’s Global Investors) holds seven, and the last one is the iPath Dow Jones-AIG Commodity Index Total Return ETF. The morale of ETFs is that you should go to a cheaper brokerage to buy these ETFs.
Winner: None, it doesn’t really matter.
Target Retirement Funds:
Last but not least, Money gave a nod to both Vanguard Target Retirement funds and T. Rowe Price Retirement funds.
Winner: Tied, Vanguard and T. Rowe Price.
Anyone have any conclusions to make from the list?
For more information on how they came up with this list, read this article .