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What are some good five-star mutual funds?

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Some five-star mutual funds offering an acceptable return on investment, as of 2015, include Matthews China Dividend Investor, T. Rowe Price Diversified Sm Cap Growth, and Vanguard PrimeCap Core Fund, according to Morningstar. These are rated highly for providing dividends or growing wealth.

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Full Answer

Morningstar rates mutual funds from one to five stars based on how well the funds have performed, considering the allocation of risk, application of sales charges, and the performance of similar funds. Many receive high ratings for their dividends, small cap growth and large growth, respectively.

One of the highest yielding five-star mutual funds is Matthews China Dividend Investor, with a year-to-date return of 25.13 percent, as of Morningstar’s July 15, 2014 report date. The five-star fund with the next highest yield is iShares Nasdaq Biotechnology, with a 17.23 percent return as of February 4, 2015. After that, WisdomTree Europe Hedged Equity ETF follows with a 16.85 percent return as of April 17, 2015.

Small cap mutual funds are available for investors looking to tap into the growth potential of smaller, lesser-known companies, according to U.S. News & World Report. For such investors, the five-star mutual fund T. Rowe Price Diversified Sm Cap Growth is a good choice, with its annual growth of 10.99 percent and its ranking as the number three Small Growth Mutual Fund by U.S. News & World Report.

On the other side of the spectrum are the large growth funds, which provide long-term capital appreciation by balancing reasonable valuations with attractive growth prospects. An investor looking for a reliable large growth fund should investigate the Vanguard PrimeCap Core Fund, the number one-ranked large growth fund by U.S. News & World Report, and a five-star rating from Morningstar.

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