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3 Great Funds for the New Year

Bargains abound, so get them while they’re not hot.

3 Great Funds for the New Year

Russel Kinnel: I’ve been looking for attractive funds in asset classes that have room to run and are well-managed so that you’ll want to hold on to them even after they make up ground on the pack.

3 Great Funds for the New Year

  1. Vanguard GNMA VFIJX
  2. Janus Henderson Small Cap Value JSCVX
  3. Dodge & Cox International Stock DODFX

Bonds have been beat up by rising interest rates and a spike in inflation. But now that inflation has fallen, the Federal Reserve may actually switch gears and start cutting rates. So, lots of parts of the bond market look attractive. One is mortgages, which have been hurt lately. I like Silver-rated Vanguard GNMA for its simple strategy and super low costs. The fund currently has a yield around 3.4%, which is decent for a low-risk strategy.

While stock investors lose their minds over AI, they’ve been neglecting the boring and steady companies of small value. That should set up small value for decent outperformance in the future. Janus Henderson Small Cap Value reopened to new investors in April 2023. I like to get in when a fund reopens because it tells me I’m going against the crowd. Managers Justin Tugman and Craig Kempler are seasoned managers who can take full advantage of a sale in good small caps. We rate the fund Silver.

Finally, foreign equities have also been neglected a bit, so I’ll re-up one of my favorite foreign value funds. Dodge & Cox International Stock is a fund I own in my 401(k), so that means I’m putting a little more in with every paycheck. The firm has just outstanding value investors with a deep team of managers and analysts who know their companies very well. The fund charges just 62 basis points, and long-term results are excellent, though it occasionally hits a bump in the road.

Watch “3 Hottest-Selling Funds” for more from Russel Kinnel.

The author or authors own shares in one or more securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Russel Kinnel

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Russel Kinnel is director of ratings, manager research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He heads the North American Medalist Rating Committee, which vets the Morningstar Medalist Rating™ for funds. He is the editor of Morningstar FundInvestor, a monthly newsletter, and has published a number of prominent studies of the fund industry covering subjects such as manager investment, expenses, and investor returns.

Since joining Morningstar in 1994, Kinnel has analyzed virtually every type of fund and has covered the most prominent fund families, including Fidelity, T. Rowe Price, and Vanguard. He has led studies on the predictive power of fund data and helped develop the Morningstar Rating for funds and the Morningstar Style Box methodology. He was co-author of the company's first book, Morningstar Guide to Mutual Funds: 5-Star Strategies for Success (Wiley, 2003), and was author of the book Fund Spy: Morningstar's Inside Secrets to Selecting Mutual Funds That Outperform, published in 2009.

Kinnel holds a bachelor's degree in economics and journalism from the University of Wisconsin.

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