The world’s largest mutual funds manage hundreds of billions of dollars, even into the trillions. Mutual funds remain one of the most popular ways to invest, offering new investors the opportunity to earn strong returns, often at low costs, even without much investment expertise or knowledge.
Here are the world’s largest mutual funds and whether or not you should invest in them.
The world’s largest mutual funds by assets
| Fund (ticker symbol) | Assets under management | Cost ratio | Average annual returns over 10 years |
|---|---|---|---|
| Source: Morningstar, as of February 27, 2024 | |||
| Vanguard Total Stock Market Index (VTSAX) | $1.47 trillion | 0.04% | 11.9% |
| Fidelity 500 Index (FXAIX) | $484.4 billion | 0.015% | 12.0% |
| Vanguard 500 Index (VFIAX) | $398.4 billion | 0.04% | 12.7% |
| Vanguard Total International Stock Index (VTIAX) | $398.1 billion | 0.11% | 4.3% |
| Vanguard Total Bond Market II Index (VTBIX) | $274.7 billion | 0.09% | 1.3% |
| Vanguard institutional index 1 (VINIX) | $269.6 billion | 0.035% | 12.7% |
| American Funds Growth Fund of America (CGFFX) | $267.5 billion | 0.73% | 12.6% |
These investment funds are all index funds, a category of funds that invest in a preset index of securities – stocks or bonds – rather than allowing fund managers to actively choose investments. An index fund simply tries to match the performance of the index it tracks, rather than trying to beat it. This passive approach typically outperforms the active approach and can still deliver strong returns, as you can see with double-digit annual returns over time. Passively managed funds can also keep costs low for investors, as evidenced by these mostly low expense ratios.
In fact, four of the aforementioned funds track the Standard & Poor’s 500 Index, a collection of approximately 500 of America’s largest companies. The S&P 500 has risen an average of 10 percent over time. Other funds are based on the total stock market or the total international stock market, while one fund tracks a bond index and therefore has a lower long-term return. When you buy these funds, you actually own a portion of the individual securities that make up the fund.
These funds offer broad diversification, meaning they invest in a wide variety of stocks and bonds from different sectors. Diversification reduces risk, although funds will still fluctuate.
For investors, the reason to own large funds is to earn strong returns at a low cost, and most funds fit that description. The largest mutual funds allow you to earn good returns without having to do a lot of research, as you would when investing in individual stocks and bonds.
Should you invest in the largest investment funds?
The world’s largest mutual funds manage a huge amount of money, exceeding the amount managed by the world’s largest exchange-traded funds (ETFs). But their size doesn’t necessarily make them a top investment. The Vanguard Total Bond Market II Index has returned just over 1 percent per year over the past decade, which lags far behind the returns of some stock funds. So you may be able to get better returns by investing in the best mutual funds or the best ETFs.
And since the largest mutual funds often invest in the largest companies – names including Magnificent 7 stocks – you may be able to earn attractive returns outside this area. For example, it may make sense to find funds that invest in smaller companies that could potentially deliver attractive returns, such as the best small-cap ETFs. These smaller companies can outperform when the large caps are out of favor, giving you the benefit of diversification.
So just because these funds are the largest doesn’t make them an immediate purchase. But funds that track indexes that have performed well over time, such as the S&P 500 or Nasdaq, may be worth investigating further. Super investor Warren Buffett has even recommended that individual investors buy S&P 500 index funds and then add to the fund over time.
In short
The world’s largest mutual funds track the most popular stock indexes, such as the S&P 500, meaning they can be a good way to invest in those indexes. But the fund’s size alone doesn’t make it a buy, and investors should look carefully at the fund’s long-term returns and its costs when deciding where to invest their money.
A financial advisor can help you navigate the best investments and discover what works best for you. Bankrate’s financial advisor matching tool lets you connect with qualified professionals in minutes.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
