The 3 Best Mutual Funds to Buy in August 2024

Sometimes plain vanilla ice cream is the best flavor to buy. This also applies to investments. While we talk a lot about buying individual stocks here at InvestorPlace, buying mutual funds is the way to go for many investors, especially those just starting out on their investment journey.

That’s because mutual funds give you instant diversification. They typically own tens if not hundreds of stocks, often in many industries. For a small price, you can own shares that would cost tens of thousands of dollars to buy individually.

However, not all mutual funds are created equal. Some fund managers will charge you a lot of money to manage portfolios. That’s why you should look for mutual fund families — money managers that offer lots of mutual funds — with low expense ratios. They don’t want to nickel and dime your portfolio to death (and it’s usually a lot more than nickels and dimes). You want as much of your money to work for you as possible.

Below are three of the best mutual funds to buy. They are among the lowest cost mutual funds to own and have excellent performance compared to the benchmark S&P 500.

Fidelity Blue Chip Growth Fund (FBGRX)

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Buying large-cap growth stocks is a preferred strategy among investors. Buy stakes at the biggest companies that offer superior performance to their peers. That’s why Fidelity Blue Chip Growth Fund (MUTF:FBGRX) is one of the best mutual funds to buy.

Fidelity is one of the leaders in low cost investing. Almost all of its mutual funds have low expense ratios, and the Blue Chip Growth Fund has a fee of 0.48%. Importantly, there is no minimum amount required to start investing. You can start with whatever money you have on hand. It has over $65.2 billion in net asset portfolio.

The fund looks for blue chips, or what it considers “well-known, well-established and well-capitalized” companies with above-average growth potential. The top three holdings of the Blue Chip Growth Fund are Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Of the 389 stocks in the portfolio, the trio represents a third of the total.

It’s very technological, but you also have significant positions in companies like the pharmaceutical giant Eli Lilly (NYSE:LLY) and Netflix (NASDAQ:NFLX).

The fund has easily outperformed the S&P 500 over the past decade, returning 378% to investors, compared to 231% for the index. The Fidelity Blue Chip Growth Fund would be a great addition to anyone’s portfolio.

Fidelity Small Cap Index Fund (FSSNX)

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At the other end of the spectrum is Fidelity Small Cap Index Fund (MUTF:FSSNX). Small-cap stocks are historically an engine of growth and over long periods outperform the benchmark.

However, over the past few years, small caps have been left behind due to the high interest rate environment. The Federal Reserve’s unprecedented hike in interest rates 11 times in one year has raised borrowing costs for small businesses. Because they don’t have the same access to finance as their older siblings, more of their available cash goes towards debt financing. The Fidelity Small Cap Index Fund has returned 114% over the past 10 years.

But the market started to pull away from the former fliers in the small-cap sector last month. The Small Cap Index fund is up nearly 4% over that time frame, compared to a 4.5% decline in the S&P 500.

Fidelity’s top three mutual fund holdings include Super Micro Computer (NASDAQ:SMCI), MicroStrategy (NASDAQ:MSTR) and Carvan (NYSE:CVNA). Look for small caps to move higher, making the Fidelity Small Cap Index Fund one of the best mutual funds to buy today.

Vanguard 500 Index Fund Admiral Shares (VFIAX)

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If mutual funds are the plain vanilla of investing, then Vanguard 500 Index Fund Admiral Shares (MUTF:VFIAX) is the clearest of all. As the name suggests, its job is to track the performance of the S&P 500. In fact, buying a fund that tracks the benchmark is all most investors need to do in their investing career.

Since its inception, the S&P 500 has grown at a compound annual growth rate of about 10.5%. Although it has had up and down years, the average holds true over time. That means an investor can hope to double their money every seven years.

Vanguard 500 Index Fund Admiral Shares was the first mutual fund ever created for individual investors. It has an incredibly low expense ratio of 0.04%. There are no purchase fees, no redemption fees, and no nasty 12b-1 fees, which is a fee that many mutual funds charge to recoup their marketing expenses.

Because the fund matches the S&P 500, its top three stocks are Microsoft, Nvidia and Apple. But you also get the full width of the 500 stocks in the index. It is undoubtedly the best mutual fund to buy for most investors.

As of the date of publication, Rich Duprey did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.