Enjoy complimentary access to top ideas and insights — selected by our editors.
In the world of mutual funds, tech is still king. But how long will its reign last?
For many financial advisors, that's the question prompted by the latest data from Morningstar Direct, the research portal of Chicago-based financial services firm Morningstar. The company ranked the highest-performing mutual funds of the past decade, and the top spots are dominated by funds focused on modern technology, particularly semiconductors.
"There's not anything surprising about this list, given the performance of the tech sector, in particular the semiconductor space," said Derek Williams, a certified financial planner at
Morningstar Direct ranked the funds in terms of their 10-year annualized returns, as measured on a specific date (as opposed to the end of the month) — in this case, Oct. 19, 2023.
No. 1 on the list is the ProFunds Semiconductor UltraSector Fund, which yielded 29.21% over the past decade. In second place is the Direxion Monthly NASDAQ-100 Bull 1.75X Fund, with 28.16%. And the bronze medal goes to the Rydex NASDAQ-100 2x Strategy Fund, which yielded 26.58%.
But not every wealth manager would recommend these products to clients. As many pointed out, the tech stocks contained in these funds have not performed equally well in all 10 of those years. The NASDAQ, for example, has
"I would caution anyone [tempted] to simply jump on board with investing in any of these mutual funds," said Matt Slaton, founder and CEO of
READ MORE:
And in any case, as many advisors pointed out, the fact that a fund has produced high returns until now does not necessarily mean it will continue to do so.
"This list really highlights the issue with measuring performance from a single point in time," Williams said. "While recent performance will show that they've performed well, investors sometimes don't understand that positive past performance doesn't always equal positive future performance."
But in terms of that past performance, the funds on Morningstar Direct's list did remarkably well. For the top 20 funds, the average 10-year annualized return was 20.83%. For comparison, the S&P 500's annualized return for the same decade
For the full list of the top 20 mutual funds of 2013 to 2023, scroll through the cardshow below. (All data is from Morningstar Direct, and is current as of Oct. 19, 2023.)
