Rating Breakdown: Best & Worst ETFs & Mutual Funds By Style


This report identifies the best ETFs and mutual funds based on the quality of their holdings and their costs. As detailed in “Low-Cost Funds Dupe Investors”, there are few funds that have both good holdings and low costs. While there are lots of cheap funds, there are very few with high-quality holdings.

Without speculating on the cause for this disconnect, I think it is fair to say that there is a severe lack of quality research into the holdings of mutual funds and ETFs. There should not be such a large gap between the quality of research on stocks and funds, which are simply groups of stocks.

After all, investors should care more about the quality of a fund’s holdings than its costs because the quality of a fund’s holdings is the single most important factor in determining its future performance.

My Predictive Rating system rates 7400+ mutual funds and ETFs according to the quality of their holdings (portfolio management rating) and their costs (total annual costs rating).

The following is a summary of my top picks and pans for all style ETFs and mutual funds. I will follow this summary with a detailed report on each style, just as I did for each sector.

Figure 1 shows the best ETF or mutual fund in each investment style as of April 10, 2014. Investors should focus on All Cap Blend, All Cap Value, All Cap Growth, Large Cap Value, and Large Cap Blend funds as only those styles contain Attractive funds.

For a full list of all ETFs and mutual funds for each investment style ranked from best to worst, see our free ETF and mutual fund screener. For more products, click here.

Figure 1: Best ETFs and Mutual Funds In Each Style

Screen shot 2014-04-16 at 11.18.08 AM
Source: New Constructs, LLC and company filings

Sun America Focused Dividend Strategy Portfolio (FDSWX) is my top rated All Cap Value fund and the number one rated mutual fund out of all style ETFs and mutual funds I cover. FTCS allocates over 52% of its assets to Attractive-or-better rated stocks, and its total annual costs are 1.09%.

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David Trainer and André Rouillard receive no compensation to write about any specific stock, sector, or theme.

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