The Best Stock Funds for the Core of an Investment Portfolio (2024)

Building an investment portfolio is a personal experience: What suits one investor may be ill-fitting for another. Factors such as risk tolerance and time horizon influence how an investor constructs a portfolio, as do things like the amount of money involved, the types of financial accounts at hand, and the level of experience and interest on the investor’s part.

Yet most investors would probably agree that they own certain funds they’d call “core” holdings: those mutual funds or exchange-traded funds they expect to do most of the heavy lifting when it comes to reaching their goals.

But what types of mutual funds and ETFs are good “core” funds?

The answer depends in part on your time horizon. For goals less than a year away, cash is the best core holding, says Morningstar portfolio strategist Amy Arnott. For goals that are, say, two to six years away, she recommends a high-quality bond fund with a short to intermediate maturity.

For longer-term goals—those a decade or longer out—Arnott says most investors should be looking to stock funds. “Typically, if you’re investing for a goal that’s at least 10 years away, you really want to be focusing on growth,” she adds.

New Morningstar research concludes that three types of stock mutual funds and ETFs make the best core portfolio holdings.

What Are the Best Investments for the Core of a Portfolio?

The best types of funds for the core of a long-term portfolio cluster in three Morningstar Categories: U.S. large blend, foreign large blend, and global large blend.

Why? Because the mutual funds and ETFs in these categories provide broad representation of the overall stock market, either in the United States or globally, says Arnott. As a result, these categories have a narrower dispersion of returns than other equity categories—and therefore generate more predictable returns. That’s just what investors want from their core holdings.

However, some mutual funds and ETFs in these groups are more representative of their categories than others. For instance, some funds may land in one of Morningstar’s blend categories that aren’t all that broad-based (concentrated active strategies, for instance). Funds that are unlike their categories in some way are typically less likely to be suitable core holdings for most investors, by our definition.

The Best Investments for the Core of Your Portfolio

How to Find the Best Stock Funds for the Core of a Long-Term Portfolio

To compile our list of the best stock funds for the core of a long-term portfolio, mutual funds and ETFs had to meet the following criteria:

  • The best long-term core stock funds have at least one share class that earns our highest Morningstar Medalist Rating of Gold with 100% analyst coverage. We expect such funds to outperform over a full market cycle.
  • These mutual funds and ETFs land in the U.S. large-blend, foreign large-blend, or global large-stock blend categories.
  • The best funds for the core of a long-term portfolio are good representatives of their categories, with three-year R-squareds equal to or above the category average and three-year tracking error numbers equal to or below the category average.

Best Stock Funds for the Core of a Long-Term Portfolio

These mutual funds and ETFs met our criteria for the best long-term core stock funds as of January 2024.

  1. American Funds International Growth and Income IGAAX
  2. DFA U.S. Core Equity DFEOX
  3. DFA U.S. Large Company DFUSX
  4. Dimensional International Core Equity Market ETF DFAI
  5. Dimensional US Core Equity Market ETF DFAU
  6. Fidelity 500 Index FXAIX
  7. Fidelity Total International Index FTIHX
  8. Fidelity Total Market Index FSKAX
  9. Fidelity Zero Large Cap Index FNILX
  10. iShares Core MSCI Total International Stock ETF IXUS
  11. iShares Core S&P Total U.S. Stock Market ETF ITOT
  12. iShares S&P 500 Index/iShares Core S&P 500 ETF WFSPX IVV
  13. Parnassus Core Equity PRBLX
  14. Schwab S&P 500 Index SWPPX
  15. Schwab Total Stock Market Index SWTSX
  16. Schwab US Broad Market ETF SCHB
  17. Schwab US Large-Cap ETF SCHX
  18. SPDR Portfolio S&P 1500 Composite Stock Market ETF SPTM
  19. State Street Equity 500 Index/SPDR Portfolio S&P 500 ETF SSEYX SPLG
  20. State Street Global All Cap Equity ex-U.S. Index SSGVX
  21. Vanguard 500 Index/Vanguard S&P 500 ETF VFIAX VOO
  22. Vanguard FTSE All-World ex-U.S. Index/ETF VFWAX VEU
  23. Vanguard Institutional Total Stock Market Index VITNX
  24. Vanguard Large Cap Index/ETF VLCAX VV
  25. Vanguard Russell 1000 Index VRNIX
  26. Vanguard Tax-Managed Capital Appreciation VTCLX
  27. Vanguard Total International Stock Index/ETF VGTSX VXUS
  28. Vanguard Total Stock Market Index/ETF VITSX VTI
  29. Vanguard Total World Stock Index/ETF VTWAX VT

Given our emphasis on highly rated funds that behave like the categories in which they fall, it’s no surprise that most of the stock funds on our list of the best stock mutual funds and ETFs for the core of a long-term portfolio are broad-based, low-cost index funds.

5 Surprising Investments That Shouldn’t Be Long-Term Core Holdings

The list also includes a mix of funds that focus exclusively on U.S. stocks, exclusively on non-U.S. stocks, and on both U.S. and non-U.S. stocks. Non-U.S. stocks don’t always provide U.S.-based investors with added diversification, but they have proved their mettle in particular climates. “Non-U.S. stocks have made a strong case for themselves in certain environments, such as when the dollar has declined relative to other major foreign currencies,” argues Morningstar director of personal finance and retirement planning Christine Benz. Moreover, having exposure to international stocks provides an investor with access to the full spectrum of investment opportunities worldwide.

Those interested in going global with their core holdings might consider choosing both a U.S. large-blend and a foreign large-blend fund from our list; others might simplify with one global large-blend stock fund, which combines both U.S. and non-U.S. stocks.

How to Find More of the Best Stock Funds for the Core of a Portfolio

Investors may want to expand their search for long-term core stock funds beyond this list, using parameters that matter to them. Here are two ways to do just that:

  • Use the Morningstar Investor screener to create your own list of core stock funds to investigate further. Beneath Investment Type, choose either mutual funds or ETFs. In the Criteria section, Morningstar Category, choose either Large Blend, Foreign Large Blend, Global Large-Stock Blend, or all three, depending on your interest. From there, you can further screen funds by their Morningstar Ratings, expenses, and more. Once you have your list, you can choose which data points you’d like to see for each fund.
  • Review one of Morningstar’s lists that define “core” differently and that go beyond the “blend” categories discussed in this article, including Core Stock Funds, Core Foreign Funds, and Core Medalist ETFs.

The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.

The Best Stock Funds for the Core of an Investment Portfolio (2024)

FAQs

What are core stocks in a portfolio? ›

Core stocks are reliable growers. They may not be growing at the same pace that a new company is. But their earnings are predictable year in and year out, and they may even pay out earnings to shareholders in the form of a dividend. Finally, core companiesare also financially healthy.

What is the core fund investment strategy? ›

The core is a less risky investment strategy focusing on stabilizing the fully leased assets available in the primary markets. These types of buildings or assets are located in a desirable location with a high credit score and tenants available for long-term leases.

What is the core portfolio of a mutual fund? ›

Core Portfolio

It consists of low-cost, diversified and typically passive investment options, such as index or Exchange-Traded Funds (ETFs). The core aims to provide stability and long-term growth through exposure to various asset classes, such as equities and fixed income.

Which funds should I have in my portfolio? ›

To achieve a diversified portfolio, look for asset classes with low or negative correlations so that if one moves down, the other tends to counteract it. ETFs and mutual funds are easy ways to select asset classes that will diversify your portfolio, but you must be aware of hidden costs and trading commissions.

What is core in funds? ›

Core holdings are the central investments of a long-term portfolio so it's essential that they have a history of reliable service and consistent returns. An exchange-traded fund (ETF) that tracks an index fund or a group of blue-chip stocks are examples of core holdings.

What is the core position of the portfolio? ›

The core of the portfolio consists of passive investments that track major market indices, such as the Standard and Poor's 500 Index (S&P 500). Additional positions, known as satellites, are added to the portfolio in the form of actively managed investments.

What is an example of a core funding? ›

Core funding is usually defined as financial support that covers basic “core” organizational and administrative costs of an NGO, including salaries of non-project staff, rent, equipment, utilities, and communications.

What are the best growth stocks? ›

10 Best Growth Stocks to Buy for 2024
StockImplied Upside*
Tesla Inc. (TSLA)4.5%
JPMorgan Chase & Co. (JPM)9.6%
Exxon Mobil Corp. (XOM)12.0%
Mastercard Inc. (MA)21.7%
6 more rows
6 days ago

What is the 4 fund investment strategy? ›

The Four Fund Combo is built on four index funds (or exchange-traded funds) that include the most basic U.S. equity asset classes: large-cap blend stocks (the S&P 500 SPX, +0.27%, in other words), large-cap value stocks, small-cap blend stocks, and small-cap value stocks.

How to build a core portfolio? ›

By definition, the core part of your portfolio is supposed to provide stable returns and low volatility to your portfolio. Eg: short-term debt mutual funds, asset allocation mutual funds or smallcases etc. On the other hand, satellite assets are supposed to provide growth and additional returns to your portfolio.

Which mutual fund in portfolio is best? ›

List of Best Mutual Funds in India sorted by Returns
  • Canara Robeco Infrastructure Fund. ...
  • JM Aggressive Hybrid Fund. ...
  • Bank of India Mid & Small Cap Equity & Debt Fund. ...
  • ICICI Prudential Equity & Debt Fund. ...
  • HDFC Balanced Advantage Fund. ...
  • ICICI Prudential Retirement Fund - Hybrid Aggressive Plan. ...
  • ICICI Prudential Multi Asset Fund.

How do I know if my mutual fund portfolio is good or bad? ›

Scale Performance of the Fund Against the Benchmark

A good mutual fund is one that constantly beats its benchmark in the long term. When a fund generates higher returns than the benchmark, the excess is known as the 'alpha' of the fund.

What is the perfect investment portfolio? ›

Commonly cited rules of thumb suggest subtracting your age from 100 or 110 to determine what portion of your portfolio should be dedicated to stock investments. For example, if you're 30, these rules suggest 70% to 80% of your portfolio allocated to stocks, leaving 20% to 30% of your portfolio for bond investments.

What are the best stocks to have in your portfolio? ›

7 of the Best Long-Term Stocks to Buy
  • Apple Inc. (ticker: AAPL)
  • Enterprise Products Partners LP (EPD)
  • Johnson & Johnson (JNJ)
  • JPMorgan Chase & Co. (JPM)
  • Prologis Inc. (PLD)
  • Southern Co. (SO)
  • Target Corp. (TGT)
3 days ago

How do I choose the best investment fund? ›

Eight tips on how to choose a fund
  1. Decide on how you approach risk. ...
  2. Learn about asset classes. ...
  3. Decide how 'hands' on you want to be. ...
  4. Think carefully about your objectives. ...
  5. Decide whether you want income or growth (or both) ...
  6. Think about which assets sectors do you want to consider. ...
  7. Take a look at our Preferred List.

What is the difference between value and core stocks? ›

The value score is subtracted from the growth score. If the result is strongly negative, the stock's style is value; if the result is strongly positive, the stock is classified as growth. If the scores for value and growth are not substantially different, the stock is classified as 'core'.

What should be in your core diversified portfolio? ›

A diversified portfolio should have a broad mix of investments. For years, many financial advisors recommended building a 60/40 portfolio, allocating 60% of capital to stocks and 40% to fixed-income investments such as bonds. Meanwhile, others have argued for more stock exposure, especially for younger investors.

What are core shares? ›

Core Shares . Non-redeemable voting shares of the Company which are not classified as Cell Shares and carrying the rights attached thereto pursuant to the Constitution.

Are core portfolios worth it? ›

E-Trade Core Portfolios: Best for

E-Trade Core Portfolios is a solid robo-advisor option for investors looking for basic features at a low cost. You'll get a portfolio built using low-cost funds while having the option to include specialty offerings such as socially responsible and smart beta funds.

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