The choices of which mutual funds to invest in are far and wide. The right choice depends on what the investor is seeking, their risk profile, their investment time horizon, and many other factors. Investors who wish to generate returns similar to the U.S. broad stock market can do so by investing in large-cap domestic stocks that represent the bulk of the U.S. stock market.
U.S. large-cap companies are typically well-established enterprises that have competitive advantages in what they produce and sell. These companies most often have large financial resources that can be deployed to generate shareholders' returns through dividends and stock buybacks.
Investors interested in investing in U.S. large-cap stocks can do so by investing in passively managed mutual funds. Below are four choices for investors seeking exposure to this area of the market. All information is as of May 14, 2020.
1. Rydex NASDAQ-100 Fund Investor Class
The Rydex NASDAQ-100 Fund Investor Class (RYOCX) tracks the performance, before fees and expenses, of the NASDAQ-100 Index, which is composed of securities issued by 100 of the largest non-financial companies listed on the NASDAQ.
About 58% of the fund's holdings are allocated to information technology companies, while consumer discretionary stocks account for about 19.3% of the fund's holdings. Microsoft is the fund's largest stock holding, with about an 11.07% allocation. The fund holds stocks of numerous other well-known companies, such as Apple, Amazon, Alphabet, and Facebook. The top 10 holdings of the fund account for 51% of the fund's assets.
2. iShares Russell 1000 Large-Cap Index Fund
- AUM: $471 million
- Trailing 5-year return: 7.52%
- Net expense ratio: 0.13%
The iShares Russell 1000 Large-Cap Index Fund (BRGAX) invests in a portfolio of stocks to attain performance to match the total return of the Russell 1000 Index, which represents the highest-ranking 1,000 stocks in the Russell 3000 Index. The fund seeks to replicate the investment results of the underlying index by holding all stocks included in the Russell 1000 Index.
The information technology sector has the largest allocation at 25%, while healthcare stocks and financial stocks account for about 15.15% and 11.62% of the fund's assets, respectively. No single holding in the fund's portfolio accounts for more than 5% of the fund's assets.
The iShares Russell 1000 Large-Cap Index Fund has earned a four-star overall rating from Morningstar. The fund has no load fees but requires a steep minimum contribution of $5 million.
3. Fidelity NASDAQ Composite Index Fund
- AUM: $7.3 billion
- Trailing 5-year return: 13.26%
- Net expense ratio: 0.30%
The Fidelity NASDAQ Composite Index Fund (FNCMX) seeks to replicate the performance of the NASDAQ Composite Index. The fund uses sampling techniques to obtain investment results that are similar to the underlying index rather than fully replicating the index's components.
Information technology stocks have by far the largest allocation at 42%, while communication services equities account for 17.4% of the fund's holdings. Holdings include Apple, Microsoft, Pepsi, Amazon, and Intel.
Morningstar has given the fund a four-star overall rating. The Fidelity NASDAQ Composite Index Fund charges no load fees and has no minimum investment.
4. AB Large-Cap Growth Fund
- AUM: $11.4 billion
- Trailing 5-year return: 14.08%
- Net expense ratio: 0.89%
The AB Large-Cap Growth Fund (APGAX) seeks the long-term growth of capital by investing in large-cap U.S. stocks, with approximately 80% of assets being invested domestically into stocks that have market caps within the range of companies included in the Russell 1000 Growth Index. The remainder of the assets may be invested in non-U.S. stocks.
The fund's holdings are concentrated in the information technology and healthcare sectors, with an allocation of 28.5% and 26.8%, respectively. Top holdings include Microsoft, Alphabet, Facebook, and Amazon.
The fund has a high expense ratio of 0.89%, load fees of 4.25%, and a minimum investment requirement of $2,500. It comes with a five-star overall rating from Morningstar.