The Best Mutual Funds – Part 3

mutual-funds-3This is the last in a 3 series post about the best mutual funds money can buy for 2009.  Now I realize that we’re almost 3/4ths of the way through 2009, but I have been using these funds all year for my clients that I manage money for, and you’ll see when you look them up that they’re doing quite well.  The following is the remainder of my best mutual funds page from and my picks of the best places to put your money.

OK, so you’re just about ready to see my list. The best mutual funds to own tend to be index type funds. The truth is, most actively managed mutual funds UNDER-perform the major market indexes over time. There are a lot of reasons for this, and we’ve already mentioned most of them. Commissions, expense ratios, and taxes all add to the cost of owned actively managed funds. All these costs make it much harder for the manager to keep up with, not to mention out-perform the market index.

“…the best way to own common stocks is through index funds… – Warren Buffett, Berkshire Hathaway Inc. 1996 Shareholder Letter

“A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,” – Warren Buffett 2007

“Additionally, those index funds that are very low-cost (such as Vanguard’s) are investor-friendly by definition and are the best selection for most of those who wish to own equities.” – see page 10 of Berkshire Hathaway Inc. 2003 Annual Report

“Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.” – page 5, 2004 Berkshire Hathaway Annual Report

“Most individual investors would be better off in an index mutual fund.” – Peter Lynch

The Best Mutual Funds for 2009 (and beyond!)

The following are all no-load funds. (Of course!)

Dimensional Small Cap Value (DFSVX) This is a small cap value fund that I believe is poised to perform extremely well as the market and economy begin to recover from this recession. Small cap stocks tend to be the first to recover after a recenssion ends, and this fund should be a top performer. Dimensional funds are index funds, but they are enhanced index funds. Dimensional Fund Advisors takes a market index and then screens out the stocks they feel are less likely to perform as well. They use 26 different screening methods to narrow down the list of stocks they want to buy. Then they use some timing and trading strategies to determine when to buy the stock.

Dimensional Emerging Markets Value (DFEVX) This is an index fund that invests in emerging foreign countries. Emerging markets, or under-developed countries, also tend to lead in performace coming out of a recession. This fund invests in countries like Brazil, Chile, China, South Africa, Czech Republic, Hungary, Mexico, Poland, Israel, Malaysia, South Korea, Indonesia, Phillipeans, Thailand & Turkey. It does not invest currently in Argentina.

Dimensional Tax Managed US Marketwide (DTMMX) This is another index fund that invests in large, mid and small cap companies here in the United States. Morningstar has is rated as a mid cap, but it really invests in all of them. Due to it’s heavy mid and small cap holdings, I believe it is also poised to do well coming out of this recession.

iShares FTSE/Xinhua China 25 Index (FXI) This is actually an ETF (which is basically a mutual fund). To read more about the benefits of ETF’s click here. Basically this is an index fund that buys the 25 largest and most liquid Chinese companies. The Chinese market lost a huge amount of it’s value in 2008 and has some great potential for 2009. This fund trades on the NY stock exchange, and trades just like a stock. This fund lost almost 68% of it’s value during the last 12 months, so there can be some heavy volatility here. Don’t bet the farm on it, but this would be a nice portion of your international exposure. Save yourself the effort of doing research on Chinese companies and just buy some of this.

 iShares U.S. Financial Sector (IYF) This is another ETF index fund that tracks the Dow Jones U.S. Financials Index. This fund lost over 75% of it’s value during the last 12 months, and is now having a nice rebound as you can imagine. I think there is most likely some great potential for returns in the financial sector, and a low cost index fund like this is an excellent way to get some exposure.

Energy Select Sector SPDR (XLE) Yes, it’s another ETF index fund that invests in companies from oil, gas, energy equipment & energy services. This is a great, low-cost way to get exposure to the entire energy sector, including the servicing companies. These stocks all tend to move up and down with the price of oil. Last year oil got over $147/barrel in May, and by October it was below $38/barrell. We could easily see oil prices right back up above $100 in no time at all.

Dimensional International Value (DFIVX) This is another DFA index fund that invests in developed foreign countries. This would include the following: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. This would be an excellent choice for the bulk of your international exposure.

Amana Mutual Income (AMANX) This is a large cap value fund that invests in mostly U.S. stocks for preservation of capital and current income. It’s has a 5-star rating from Morningstar and you can check out it’s details at Although this is not a small cap fund, you still need to have some exposure to large caps at all times in your portfolio. The unique thing about this fund is that investment decisions are made in accordance with Islamic principals. It diversifies investments across industries and companies, and generally follows a value investment style.

Fidelity Strategic Income (FSICX) This is another one of my best mutual funds picks for 2009. This is a bond fund that invest in many different types of bonds, so it’s called a multi-sector bond fund. It invests primarily in debt securities by allocating assets among four general investment categories: high yield securities, U.S. Government and investment-grade securities, emerging market securities, and foreign developed market securities. The fund uses a neutral mix of approximately 40% high yield, 30% U.S. Government and investment-grade, 15% emerging markets, and 15% foreign developed markets. High yield bonds are another type of investment that tend to out-perform as the economy and market begins to recover.

If you would like to learn more about the benefits of hiring a professional money manager to help you manage your portfolio of mutual funds, including your 401K plan, click here.

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