What The “Best Mutual Funds” Are Depends On Your Goals

It’s a bit of a national past-time, within the financial press, to publish “best-of” lists.  Especially when you can’t think of anything better to write about.  Hence, “best mutual funds” lists have cropped up in newspapers, magazines, and websites across the globe for time immemorial.  Heck, I’m pretty guilty of that, myself.  I’ve written about The Best Mutual Funds For Your IRA, The Best Mutual Funds For Your Taxable Account, and The Best International Mutual Funds.

Why are these “best mutual funds” articles so popular?  It’s simple:  they’re a.) easy to write about, b.) subjective, so nobody can really argue with your choices, and c.) people will end up arguing about your choices anyway, and that’s the best free publicity there is.  So yeah, I’ll probably publish a few more “best-of” lists myself in the months to come.

So What Are The Best Mutual Funds, Really???

But some because somebody hands you a list saying “these are the 5 best mutual funds you could own” doesn’t make it so.  Your first question should be, “well, the 5 best mutual funds for what?!?”  The Vanguard Total Stock Market Index Fund (VTSMX) is great for a young investor seeking long-term growth of capital as part of a globally-diversified, balanced portfolio.  But it may be entirely inappropriate for a widow who can’t afford to lose a dime of her savings if she’s to avoid losing her home.

Similarly, the Vanguard Wellesley Income Fund (VWINX) or Vanguard Star Fund (VGSTX) may be fine for more conservative investors more interested in preservation of capital than appreciation of capital.  The Target Retirement Funds may be ideal for non-savvy investors who just want a reliable one-stop shop to park their savings.

It Depends On Your Goals, Stupid!

The fact is, it’s impossible to answer the question “what is the best mutual fund” without knowing exactly your financial goals (including your ability to actually follow through on them), risk tolerance, time horizon, and a billion other little facts about you.  Without all of that information and more, I would be lying if I told you what the best mutual funds were.  They may be the best funds for my goals and purposes, but that has little bearing on your own personal situation.

So remember, most “best-of” lists are written to fill space and generate discussion, nothing more.  Arguing over the merits of this mutual fund over that, or this asset class over the other, is a ton of fun.  And you can learn a lot from intelligent debate.  But see these lists for what they are, entertainment.  Not actual applicable advice.