Starter Funds

Large-Cap Funds

The funds in this list all hold the largest U.S. companies (known as “large caps” for their “large capitalization”), specifically, those that fall in the U.S. large value, large blend, and large growth categories. Morningstar defines large-cap stocks as the group that accounts for the top 70% of the capitalization of the U.S. market. Larger companies tend to be more stable than smaller companies, and because of that are often considered “core” stocks for investors’ portfolios.

Or Intermediate-Term Bond Fund

Investors seeking diversification benefits for an equity-heavy portfolio can be well served by higher-quality, intermediate-term core bond funds, which blend government bonds, mortgage-backed securities, and high-quality corporate debt and have an average duration of greater than or equal to 3.5 years but less than or equal to six years.

Or Target-Date Funds

These funds, which will include a year in their names, hold a mix of stocks and bonds. Funds whose target retirement year is far in the future will hold mostly stocks for long-term growth potential, but will gradually shift to hold more bonds as the target year approaches. Funds close to their target year will hold more bonds for stability, as it is assumed the investor will begin withdrawing money soon. These funds adjust their allocations automatically for investors along a so-called “glidepath,” so they can be a good choice for hands-off investors who want a diversified fund they don’t have to babysit.

Gold-Rated Funds

The Analyst Rating for Funds is based on our fund analysts’ conviction in a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. If a fund receives a Gold, Silver, or Bronze rating (i.e., a Medalist rating), it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.

Minimum Purchase Less Than $1,000

The minimum initial purchase is the smallest amount of money required to initiate a position in the fund. The funds in this screen require less than $1,000 to start (some of these funds may also require the investment to be held in an IRA to qualify for the low initial purchase amount). Follow-on contributions are typically much lower, often as low as $100.

No-Load Funds

This list includes only no-load funds. “No load” refers to a mutual fund that does not charge a fee (known as a load) for buying or selling its shares; the investor typically buys no-load funds directly from a fund company or through a fund supermarket. Load funds, on the other hand, are sold by an advisor or broker and charge a percentage fee at purchase or sale of the shares, which is meant to be compensation for the planner’s investment-selection advice. (Note: Not all advisors sell load funds. Many are compensated via a flat fee or a percentage of all assets under management.) Whether a fund charges a load or not isn’t a reflection of its underlying quality. Many load funds are also Medalists, and some load funds are available without a load through 401(k) or other retirement plans. But we’re including only no-load funds here, since this list is designed to help investors who are primarily doing their own fund-picking.

Distinct Portfolios Only

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. Screening for “distinct portfolios only” removes all but one of these options to avoid having several share classes of the same offering cluttering the list. Morningstar normally designates the oldest share class as the distinct portfolio. In some cases, this share class may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. In those cases, investors may want to consider an “investor” share class of the same fund, though the fund expenses may be higher for those share classes.

Open to New Investment

All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.