First, this is the first time since we started listing the top five-year performers in 2010 that no bond, precious metals or emerging market funds have a top overall ranking. Among the 10 best performers (we expanded the list from six to 10 last year), nine are domestic funds. Oberweis International Opportunities fund (OBIOX) is the only top performer to primarily invest in foreign securities.
Second, a big shake-up has occurred in the category rankings, which are shown in Table 1. The best-performing bond category, convertible bond, only ranks ninth. The next best bond category, corporate high-yield, is in the 23rd spot, about midway in the rankings of the 47 categories. Last year, bond categories occupied the top four spots and eight of the top 10 spots.
Third, as we discussed in the 2014 mutual fund guide (February 2014 AAII Journal), a shift in the calendar significantly boosted the five-year performance of stock categories and equity-focused mutual funds. The negative returns of 2008 have been replaced with 2013’s big gains. The starting values for calculating five-year performance have also changed, with the depressed year-end 2008 net asset values replacing the higher year-end 2007 net asset values. This why the large-cap stock, mid-cap stock and small-cap stock categories appear in the top 10 for the first time since we started publishing the category ranking in 2010.
Fourth, the calendar-year shift highlights the funds that perform better in an environment that rewards riskier strategies. This year’s top 10 funds have an average total risk index score of 1.42, versus the 1.22 average risk index score for last year’s top funds. During bullish market conditions, opting for funds with higher total risk indexes can lead to higher returns. This factor makes this year’s list something to consider saving for the next bull market, with the caveat that funds and market conditions change over the time.
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