10 Funds That Can Beat the Market for Another Decade

It's difficult to find funds that can consistently beat the market over time.

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It's difficult to find funds that can consistently beat the market over time. The Standard & Poor’s 500-stock index is barely scraping above breakeven in 2018, sure, but it averages 8% gains annually. The bar has been set even higher of late, with the index up 15% over the past year and 19.4% during calendar 2017.

If you want to do much better than that, you have a trying path ahead. Yes, many funds out there have beaten the index over shorter time frames. But it’s difficult to find long-term outperformers, even more difficult to find ones that look primed to continue doing so in the years ahead, and almost impossible to do without taking on a little more risk.

“You have to weight your portfolio differently than that of the greater market (e.g., the hierarchy of the S&P 500, which overweights the largest companies),” says Tim Courtney, chief investment officer of Exencial Wealth Advisors. “The question then becomes how you should weight your portfolio to do that? The bottom line is, if you want to beat the market, you have to be willing to take on more risk by weighting more towards riskier companies.”

There are other ways of taking on risk to beat the market, however, such as investing in certain closed-end funds. Some CEFs leverage debt, trade options or use other mechanisms to generate higher returns. While these methods sometimes can backfire, the most agile managers are able to squeeze the most upside out of these strategies while taming the downside.

The following 10 funds have not only beaten the S&P 500 over the past decade, but are built in such a way that they could continue to outperform over the next 10 years. Any investor that is interested in both strong returns as well as income are likely to find both in spades across this selection of funds.

Data is as of March 6, 2018. Distribution rate can be a combination of dividends, interest income, realized capital gains and return of capital, and is an annualized reflection of the most recent payout. Distribution rate is a standard measure for CEFs. Fund expenses provided by Morningstar. Click on ticker-symbol links in each slide for current share prices and more.

Michael Foster
Contributing Writer, Kiplinger.com
Michael Foster is the Lead Research Analyst for Contrarian Outlook, where he writes CEF Insider. He has written on high-income assets, dividends, closed-end funds and exchange-traded funds for a number of publications including Forbes, Bankrate and SeekingAlpha. Michael finished his PhD in 2008 and has been advising investors since 2011.