Best Mutual Funds for 2017, 2018 and 2019

See the Best Funds to End the Decade

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Smart investors don't try to time the market by jumping in and out of investments in the short-term but will instead employ a buy and hold strategy for periods of three years or more. With this investing philosophy in mind, we can determine which are the best mutual funds to buy and hold for 2017, 2018 and 2019.

When choosing the best funds to buy, no matter the duration of the holding period, investors are smart to choose among the best, low-cost, no-load funds.

This is because keeping costs low is a fundamental aspect of producing higher returns, especially in the long run.

Now for choosing the best funds for a three-year period, such as 2017, 2018, and 2019: Market and economic conditions are extremely difficult to predict over short periods of time, especially those less than one year in duration. But when you expand the holding period to two or three years, you can make reasonable forecasts.

Even the best of portfolio managers know that they may perform below market averages for one out of three years. But if they can win in two of three, they're doing well.

So with that backdrop, here are the best funds that have potential to be leaders in the three-year period of 2017 through 2019:

Best Mutual Funds for 2017, 2018 and 2019: Stock Funds

We'll start our list of best funds that focus on stocks:

  • Vanguard 500 Index (VFINX): When building a portfolio of mutual funds, it's good to start with large-cap stock index fund as a core holding. Total stock index funds are also good choices but for core holdings in 2017 to 2019, an index fund like VFINX will likely be better because total stock funds include small-cap stocks, which will likely see significant declines during a major correction that can occur during the three-year period. VFINX has a rock bottom expense ratio of 0.16 percent and an initial minimum purchase of $3,000.
  • Vanguard Mid-Cap Index (VIMSX): A major correction (more than 10 percent decline in stock prices) is highly likely in the 2017 to 2019 period. Small-cap stocks and mid-cap stocks would likely decline in price more than large-caps, which is the reasoning for choosing VFINX as a core holding. However, a strong US dollar in 2017, extending into 2018, could be more bullish for mid-cap stocks. This is why mid-caps can be the "sweet spot" of investing, where investors can capture more upside in bull markets but not too much of the downside in down markets. VIMSX has an expense ratio of 0.20 percent and a minimum initial investment of $3,000.
  • Fidelity Select Consumer Staples (FDFAX): Stocks are overdue for a bear market but it's not smart to completely jump out of stocks and wait for the major correction to come and go before getting back in. Instead, it's smart to stay in stocks but just tap down the risk a bit by investing in defensive areas like consumer staples, which are companies that sell products and services that consumers still need, regardless of economic conditions. In good times and in bad, we still need food, clothes, and health care. The expense ratio for FDFAX is 0.77 percent and the minimum initial investment is $2,000.
  • Vanguard Health Care (VGHCX): The health care sector was a loser in 2016 but it was due for a correction after years of market leadership. However, an aging population combined with advances in biotechnology makes for an outstanding long-term holding in almost any portfolio. The health sector, which includes pharmaceuticals, hospitals, medical devices, and other health products and services, not only makes for a strong long-term holding but may prove to be a smart defensive move when the inevitable correction hits. VGHCX has an expense ratio of just 0.36 percent and a minimum initial investment of $3,000.
  • Vanguard Energy (VGENX): Energy and other sectors that rely on raw materials tend to outperform in the late stage of the business cycle, which is where the U.S.economy is in 2017 and possibly into 2018 and 2019. Energy can also make for a good diversification tool because the sector's price movement is not highly correlated to the broader market indices, such as the S&P 500. VGENX has an expense ratio of 0.37 percent and a minimum initial investment of $3,000.

Best Balanced Funds for 2017, 2018 and 2019

If you want to take the one-fund approach, a smart way to do it is with balanced funds. Here are some of the best to consider for 2017 through 2019.

  • Vanguard Balanced (VBINX): Stocks are likely to outperform bonds in the 2017 to 2019 period; therefore balanced funds like VBINX that lean more toward stocks than bonds are a good idea. VBINX has an asset allocation of roughly two-thirds stocks and one-third bonds, which makes for solid moderate allocation that can easily stay ahead of inflation long term. The expense ratio for VBINX is just 0.22 percent and the minimum initial purchase amount is $3,000.
  • Hussman Strategic Total Return (HSTRX): If you're looking for a mutual fund that acts like a hedge fund, HSTRX is among the best you can find. The fund manager, John Hussman, is known for predicting the 2008 market downturn and for creating a balance of assets to average inflation-beating average returns while minimizing losses in market corrections. HSTRX won't often lead the market on the upside but it's a good fund to hold when the economy finally enters a recession. The expense ratio for HSTRX is a reasonable 0.69 percent and the minimum investment is $1,000.

Best Bond Funds for 2017, 2018 and 2019

With rising interest rates in 2017 and possibly longer, bond prices will be falling, especially for the most interest-rate sensitive bonds. These bond funds should prove to be leaders through 2019:

  • Loomis Sayles Bond (LSBRX): When bond markets get challenging, it's a good idea to turn to an experienced fund manager that has seen everything in fixed income markets for the past several decades. Only LSBRX manager Dan Fuss can say he's been managing bonds for 50 years or more. The funds go anywhere style means it can hold U.S. bonds, foreign bonds, Treasury bonds, high-yield bonds, and any duration needed to navigate the market. Although LSBRX can see steep declines in negative market environments, it often leads average bonds in periods of three years or more. The expense ratio for LSBRX is 0.91 percent and the minimum initial investment is $2,500.
  • Vanguard Short-term Investment Grade Bond (VFSTX): If you want to tap down on the interest rate risk, a great way to do it is with a short-term bond funds like VFSTX. When interest rates are rising, intermediate- and long-term bonds will generally decline in price more than short-term bonds. And the investment grade feature means that there is a balance of high credit quality and some lower credit quality bonds that can help juice the yields. The expense ratio for VFSTX is 0.20 percent and the minimum initial purchase is $3,000.

Now that you have a list of the best mutual funds to buy in 2017, 2018 and 2019, it is important to remember that investing in just one fund, unless it's a balanced fund, is generally not a good idea. Therefore a combination of several of the above funds in one portfolio can make for a diversified mix.

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.