Angus Greig
By Taylor Tepper
Updated: January 4, 2016 11:08 AM ET | Originally published: January 5, 2015

Here’s the updated 2016 edition of MONEY 50: The World’s Best Mutual Funds and ETFs.

Over the past five years of impressive stock and bond returns, the rising tide lifted nearly all boats. Alas, tides ebb, and the markets have been high for longer than usual. It’s time to look at what matters to you not only when seas are calm, but also when they’re stormy.

That’s the thinking behind the MONEY 50, our selection of the world’s best mutual and exchange-traded funds. Note that we didn’t say “top-performing” or “hottest.” Instead, by sticking to low-cost portfolios run by rock-solid management, the MONEY 50 is meant to give you the best shot possible at outperformance over dec­ades, not months or years.

How to use the list? The funds are broken into three basic categories — building-block, custom, and single-decision — each of which is meant for a different purpose.

  • Building-block: Use these as your core holdings. These are 14 low-fee index funds — both traditional mutual funds and ETFs, which you buy and sell like stock — that closely track market benchmarks such as the S&P 500. The goal with here is broad diversification.
  • Custom: Use these to augment your core holdings with alternative investments such as real estate or natural resources. You can also use them to tilt your portfolio toward asset classes that tend to outperform the market over the long run, such as the stocks of smaller companies or “value” stocks, which are cheap relative to their earnings per share.
  • Single-decision: For those who want to make just a single investment decision, these two target ­retirement-date fund offerings grow more conservative as you get older.

Two final notes: First, for help with some of the terminology in the MONEY 50, you’ll find a glossary below the tables; and second, for more about how we choose the MONEY 50 funds, and how the list changed this year compared to last, read this.

And now, the world’s 50 best mutual and exchange-traded funds:

Building-Block Funds

These funds and ETFs, which offer you exposure to big chunks of the stock and bond markets, should be used for the core part of your portfolio that you’ll hold on to for years. because you’re seeking broad market exposure, low-cost diversified index funds are your best bet.

Large Cap Style Expense Ratio YTD Return 5 yr Return Initial Investment
Schwab S&P 500 Index Blend 0.09 13.5% 15.9% $100
Schwab Total Stock Market Index Blend 0.09 11.9% 16.2% $100

Midcap/Small-Cap Style Expense Ratio YTD Return 5 yr Return Initial Investment
iShares Core S&P Mid-Cap ETF Blend 0.14 8.1% 17.1% N.A.
iShares Core S&P Small-Cap ETF Blend 0.14 2.4% 17.7% N.A.

Foreign Style Expense Ratio YTD Return 5 yr Return Initial Investment
Fidelity Spartan International Large Blend 0.20 -2.6% 6.1% $2,500
Vanguard Total International Stock Large Blend 0.22 -2.1% 5.0% $3,000
Vanguard FTSE All-World ex-U.S. Small-Cap Small/Mid Blend 0.40 -4.4% 6.6% $3,000
Vanguard Emerging Markets Stock Emerging Markets 0.33 2.2% 2.6% $3,000

Specialty Style Expense Ratio YTD Return 5 yr Return Initial Investment
Vanguard REIT Index Real Estate 0.24 28.4% 17.6% $3,000

Bond Style Expense Ratio YTD Return 5 yr Return Initial Investment
Vanguard Total Bond Market Index Intermediate Term 0.20 5.3% 3.9% $3,000
Vanguard Short-Term Bond Index Short Term 0.20 1.2% 1.8% $3,000
Vanguard Inflation-Protected Securities Inflation-Protected 0.20 3.8% 3.8% $3,000
Vanguard S/T Inflation-Protected Sec. ETF Inflation-Protected 0.10 -0.6% N.A. N.A.
Vanguard Total International Bond Index World 0.23 7.9% N.A. $3,000

Custom Funds

Supplement your core holdings with these funds to give your portfolio a tilt toward certain kinds of stocks and bonds, diversify more broadly, or play a hunch.

Large Cap

Style Expense Ratio YTD Return 5 yr Return Initial Investment
Dodge & Cox Stock Value 0.52 10.4% 16.0% $2,500
PowerShares FTSE RAFI U.S. 1000 ETF Value 0.39 11.6% 16.4% N.A.
Sound Shore Value 0.93 11.9% 15.4% $10,000
Primecap Odyssey Growth Growth 0.66 15.1% 17.1% $2,000
T. Rowe Price Blue Chip Growth Growth 0.74 9.6% 17.7% $2,500

Large Cap

Mid-Cap Style Expense Ratio YTD Return 5 yr Return Initial Investment
The Delafield Fund Value 1.22 -6.0% 11.9% $1,000
Ariel Appreciation Blend 1.13 7.1% 16.7% $1,000
Weitz Hickory Blend 1.22 0.8% 17.3% $2,500
T. Rowe Price Div. Mid-Cap Growth Growth 0.91 10.1% 17.1% $2,500

Small-Cap Style Expense Ratio YTD Return 5 yr Return Initial Investment
Royce Opportunity Value 1.17 -4.1% 15.7% $2,000
Vanguard Small-Cap Value ETF Value 0.09 8.3% 17.0% N.A.
Berwyn Blend 1.20 -7% 14.9% $3,000
Wasatch Small Cap Growth5 Growth 1.24 0% 15.5% $2,000

Foreign Style Expense Ratio YTD Return 5 yr Return Initial Investment
Dodge & Cox International Stock Large Blend 0.64 3.3% 8.8% $2,500
Oakmark International5 Large Blend 0.98 -2.6% 10.6% $1,000
Vanguard International Growth Large Growth 0.48 -2.7% 7.7% $3,000
T. Rowe Price Emerging Markets Emerging Markets 1.25 3% 2.9% $2,500

Bond Style Expense Ratio YTD Return 5 yr Return Initial Investment
Dodge & Cox Income Fund Intermediate Term 0.43 5.4% 5.1% $2,500
Fidelity Total Bond (FTBFX) Intermediate Term 0.45 5.3% 5.3% $2,500
Vanguard Short-Term Investment Grade Short Term 0.20 1.7% 2.8% $3,000
iShares iBoxx $ Inv. Grade Corp. Corporate 0.15 7.9% 6.8% N.A.
Loomis Sayles Bond Multisector 0.92 4.9% 8.5% $2,500
Fidelity High Income High Yield 0.72 1.8% 8.5% $2,500
Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares Muni Nat’l Intermediate 0.20 6.9% 4.4% $3,000
Vanguard Limited-Term Tax-Exempt Fund Muni Nat’l Short 0.20 1.9% 1.9% $3,000
Templeton Global Bund Fund4 World 0.88 2.7% 6.1% $1,000
Fidelity New Markets Income Emerging Markets 0.86 5.7% 7.4% $2,500

One-Decision Funds

Don’t want to put together a portfolio on your own? Then use one of these professionally managed funds that hold a diversified mix of stocks and bonds.

Fund Name Style Expense Ratio YTD Return 5 yr Return Initial Investment
Fidelity Balanced Balanced 0.56 10.1% 12.0% $2,500
Vanguard Wellington Fund Balanced 0.26 10.1% 11.5% $3,000
T. Rowe Price Retirement 2020 Fund Target Date 0.67 6.0% 10.7% $2,500
Vanguard Target Retirement 2035 Fund Investor Shares Target Date 0.18 7.4% 11.8% $1,000
NOTES: 1. Net prospectus expense ratios were used. 2. Total return figures are as of Dec. 8. 3. Five-year returns are annualized. 4. 4.25% sales load. 5. Shares available only through fund company. ETFs do not have a minimum initial investment. SOURCES: Lipper and fund companies

Fund glossary

Large-cap: Invests in shares of firms with stock market values, or market capitalizations, of $10 billion or more

Small-cap and midcap: Invest in smaller companies

Specialty: Invests in assets that don’t move in sync with the broad stock or bond market

Target date: Provides exposure to a mix of stocks and bonds appropriate for your age—and gradually grows more conservative over time

Balanced: Offers you exposure to a mix of stocks and bonds, but doesn’t grow more conservative over time

Value: Looks for stocks that are selling at bargain prices

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Growth: Focuses on companies with fast-growing earnings

Blend: Owns both growth- and value-oriented stocks

Short term: Owns bonds that mature in about two years or less

Intermediate term: Owns bonds that mature in two to 10 years

Multisector: Can buy foreign or domestic bonds of any maturity

Inflation-protected: Owns bonds whose value at least keeps pace with the consumer price index

Read next: How MONEY Selected the 50 Best Mutual Funds and ETFs

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