Municipal bond, mid-cap growth, small growth and small value mutual funds accounted for half of the bottom 50 performers list in Table 2. Municipal bond categories were the most prominent on the list.

Two different factors weighed on municipal bonds in 2025. First, many municipalities accelerated the issuance of new bonds during the spring amid fears of a potential change in tax law. [The One Big Beautiful Bill Act (OBBBA) did not alter the federal tax exemption for muni bond interest.] This extra supply drove down prices. The other factor was Federal Reserve interest rate cuts, which can encourage investors to allocate more to stocks.

Download the Excel spreadsheet of Table 2.

Mid- and small-cap funds lagged last year because of lower exposure to artificial intelligence (AI) companies relative to large-cap funds.

Just two mutual funds were on both the 2025 and 2024 Bottom 50 Mutual Fund Performers lists: Fidelity Select Chemicals fund (FSCHX) and Goldman Sachs Managed Futures Strategy fund (GFIRX). Continued weakness in demand for chemicals hurt Fidelity Select Chemicals.