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Fund Watch

Big Changes in Rankings of Top-Performing Mutual Funds

One constant: Big-company funds beat their smaller brethren.

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Readers who pay close attention to our annual rankings of the top-performing mutual funds may be forgiven if they exper­ience a sense of déjà vu with our March 2016 issue. Yes, we did publish mutual-fund rankings in our September 2015 issue. But we’ve decided to move our annual winners list from September to the March issue so we can base it on returns as of December 31. (On Kiplinger.com, we continue to update the rankings of top-performing mutual funds in 11 categories with new data every month.) “It’s fair to say that most people focus more on returns through the end of the year than they do on figures through June 30,” says ex­ecutive editor Manny Schiffres, who supervises our investing coverage.

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What a difference half a year makes. Between the September and March issues, the winners over longer time periods remained fairly stable. But adding six months of new data and subtracting six months of old numbers shook up the one-year results. Particularly affected were sector funds. In Sept­ember, health care funds occupied the top spot in each time period, and health care still dominates the three- and five-year returns. But there has been a shift in the one-year rankings, where you’ll now find technology funds, financial-services funds and even a retailing-sector fund.

Sadly, 2015 turned out to be “a lousy year,” says Manny. The big news was the dominance of the FANGs: Facebook, Amazon.com, Netflix and Google. If a large-company fund didn’t own at least two of those four stocks, it didn’t show up on the list.

As in September, big-company funds beat their smaller brethren, but that wasn’t saying much; the average large-capitalization fund lost 0.2% for the year, versus losses of 3.2% for mid-cap funds and 4.6% for small-company funds. Meanwhile, the stock market got off to a terrible start in early January, with the FANGs leading the plunge. Says Manny, “If the market continues to go down, we may end up concluding that the bull market ended in May 2015.”