Mutual funds that outperform the S&P 500
There’s a reason why the S&P 500 Index is considered the king of investments. Very few strategies outperform the benchmark index over the long term.
Even the greatest investor of all time, Warren Buffett, agrees. The Oracle of Omaha encourages investors to simply buy S&P 500 index funds instead of individual stocks.
However, investors who want to beat the market have a powerful tool at their disposal: mutual funds.
According to financial educator Dave Ramsey, mutual funds are an investor’s best shot at outperforming the S&P 500 consistently without taking on excessive risk.
Ramsey’s philosophy centers around buying and holding a diverse mix of stock mutual funds, such as growth and investment funds, growth funds, aggressive growth funds, and international funds.
“This mixture will help ensure your investments are well diversified and help you beat the market average,” Ramsey said.
In Ramsey’s view, the best mutual funds are those with at least ten years of strong returns that consistently outperform the S&P 500.
Mutual funds that have outperformed the benchmark in the last five years also have a good shot at continuing their trend.
Whether five years or ten years, very few mutual funds actually meet these stringent criteria. Those that do are usually actively managed funds, which means investors can expect to pay higher management fees.
Top-performing mutual funds
The S&P 500 Index has gained a whopping 81% over the past five years. As Investors Observer reported, the benchmark is widely expected to continue its uptrend this year, reaching new all-time highs.
When building a market-beating mutual fund portfolio, it’s important to consider funds that have outperformed the S&P 500 Index for considerable stretches in recent years.
In the chart below, there are six such funds that have performed exceptionally well compared to the benchmark. Each fund’s performance is compared to the S&P 500 Index over the past five years.
Three of these funds have outperformed the S&P 500 Index over the entire five-year period, whereas the other three have posted higher returns over shorter stretches.
Based on their historical performance, each would make a good addition to an investor portfolio that seeks to outperform the market.
| Mutual Fund | 5-year return |
| T. Rowe Price U.S. Large Cap Growth Equity Fund (TRLGX) | 82% |
| Hennessy Cornerstone Mid Cap 30 Fund (HFMDX) | 76% |
| Brown Advisory U.S. Equity Fund (BAFAX) | 64% |
| Fidelity Select Semiconductors (FSELX) | 170% |
| PGIM Jennison Technology (PGKRX) | 117% |
| Gabelli Global Growth (GGGAX) | 60.1% |
T. Rowe Price U.S. Large Cap Growth Equity Fund (TRLGX)
When considering the best types of mutual funds, global investment manager T. Rowe Price offers a highly competitive large-cap growth fund known as TRLGX. With $22.7 billion in net assets, TRLGX invests at least 80% of its assets in large-cap stocks.
The fund’s largest holdings are in the technology and communications sectors, and its portfolio consists of major tech giants like Microsoft, Nvidia, Apple, Amazon, and Google's parent company, Alphabet.
TRLGX has returned more than 23% over the past year and is up 82% over the past five years. It has one of the lowest expense ratios on the list at 0.56%. A competitive fee and high liquidity make TRLGX an attractive option for investors.
Hennessy Cornerstone Mid Cap 30 Fund (HFMDX)
The Hennessy Cornerstone Mid Cap 30 Fund invests 80% of its assets in mid-cap growth-oriented stocks. A mid-cap stock is a company with a market capitalization of between $2 billion and $10 billion—not small by any means, but still has enough room for exponential growth.
As the name implies, HFMDX is concentrated in 30 domestic stocks with strong one-year price appreciation. The fund also selects companies with favorable price-to-earnings ratios, rising annual earnings, and positive stock performance over the previous six months.
The fund has more than $1.7 billion in net assets and a higher management fee of 1.35%.
HFMDX has slightly underperformed the S&P 500 Index over the past year, gaining just over 19%. However, it has returned a total of 76% over the past five years, which is impressive given its focus on middle-of-the-pack companies.
Its single largest holdings are Peloton Interactive, Alaska Air Group, Brinker International, and Newell Brands at more than 4% apiece.
Brown Advisory U.S. Equity Fund (BAFAX)
The Brown Advisory U.S. Equity Fund is a large growth fund that invests at least 80% of its net assets in a diversified portfolio of stocks. More than 26% of its net assets are invested in the financial services industry, with large holdings of Mastercard and Visa shares.
Some of its other large holdings include Microsoft, KKR & Co, Meta, Amazon, Taiwan Semiconductor Manufacturing, and Alphabet.
BAFAX’s total one-year return is nearly 21% and its total five-year return is 64%. However, it has exhibited very strong returns over certain stretches.
According to the fund’s prospectus, BAFAX outperformed the S&P 500 Index for the 12-month period that ended on June 30, 2024. The fund has gained a whopping 53% over the past two years, slightly above the S&P 500 over the same period.
Beyond that, BAFAX’s annualized returns before taxes are very comparable to the S&P 500 Index. The fund has nearly $1 billion in net assets and an expense ratio of 0.93%.
Fidelity Select Semiconductors (FSELX)
When considering the best Fidelity mutual funds, FSELX stands out as an exceptional performer. As the name implies, FSELX invests primarily in U.S. and foreign companies that develop, manufacture, or sell semiconductors and related equipment.
The fund’s strategy relies on evaluating each company’s financial condition and broader market and economic conditions that may influence the semiconductor industry. It has more than $20.5 billion in net assets.
The fund’s largest holding is Nvidia, at nearly 25%, followed by Broadcom (12.3%), Marvell Technology (7.1%), and Taiwan Semiconductor Manufacturing (6.8%).
FSELX has an expense ratio of 0.65%, which is competitive for the returns it has produced for investors. The fund has outperformed the S&P 500 Index over a one-year (43%), five-year (170%), and ten-year (318%) period.
PGIM Jennison Technology (PGKRX)
The PGIM Jennison Technology fund has outpaced the S&P 500 thanks to its massive exposure to technology stocks. PGKRX invests at least 80% of its assets in technology and technology-related companies.
The fund’s single largest holding is Nvidia (12.9%), followed by Broadcom (8%), Apple (6.6%), Microsoft (6.59%), and Netflix (2.87%). As a result, PGKRX has outperformed the S&P 500 Index by a wide margin over the past five years.
Compared to January 2024, the PGIM Jennison Technology fund has increased more than 34%. Its five-year total return is nearly 117%.
With net assets of $41 million, PGKRX is a much smaller fund compared to the others on the list. Its expense ratio is 0.8%.
Gabelli Global Growth (GGGAX)
The Gabelli Global Growth fund invests primarily in stocks that are expected to see rapid earnings and revenue growth, are undervalued or are likely to see above-average price gains.
At least 40% of the fund’s net assets are invested outside the United States. It has $169 million in net assets.
Currently, nearly 94% of the fund’s assets are in stocks and the remaining 6% is in bonds. Its stock portfolio is mainly concentrated in the technology (48.3%) and consumer cyclical (18.9%) industries.
GGGAX has outperformed the S&P 500 Index over the past year, gaining more than 27%. It boasts a total five-year return of 60%. However, its average five-year return is a much smaller 11.3%.
At 0.9%, GGGAX has a lower management fee than most of its competitors, according to Morningstar.