In 2014, all the major benchmarks posted solid gains banking on an overall positive economic scenario in the U.S. The Dow, S&P 500 and Nasdaq gained 7.5%, 11.4% and 13.4%, respectively in 2014. The S&P 500 has gained 64% in the last three years. The gains in 2014 came despite international concerns, which were weathered by strength in the domestic economy.
In fact, the S&P 500 (SPX) had started 2014 with three straight declines, which earned it the unfortunate feat of its worst start to any year in about 10 years. However, domestic events such as strong GDP numbers, improving labor market and Fed's assurance about the economy have helped benchmarks stay in the green and record highs.
Looking at mutual funds, the latest figures from Investment Company Institute's (ICI) survey of the mutual fund industry suggest that the nation's combined assets increased 1.3% to $15.96 trillion in November.
For investors keen to find out the best performing funds so far this year, we will pick 3 of them based on top Zacks rank, no sales load and a low expense ratio. However before doing so, let's look at the key international developments in 2014 and category performances.
Key International Developments in 2014
Russia: Russia has not been the ideal investment region this year. The Ukraine crisis from the start of this year, followed by standoff with Western countries and the rounds of sanctions have affected the Russian economy. (Read: MH17 Crash, Fresh US Sanctions: Beware of Funds with Russia Exposure). The plight was intensified by the inflation rate and the nosedive of the Russian currency, the ruble, was subjected to. (Read: Russia's Trouble with Ruble Continues: Funds in Focus).
Europe: The Eurozone mostly reported dismal economic numbers in 2014, including the zero growth in the second quarter. In fact, the region's economic power house Germany also looked shaky. Although Germany has been the star performer during the Euro crisis, it was not completely immune to the regional factors that influence the economic parameters. (Read: Germany Intensifies Eurozone's Recession Woes: 3 Funds to Sell).
Japan: Japan's economy entered a technical recession after GDP declined 1.6% in the Jul-Sep period. This was possibly a result of a hike in consumption tax in April from 5% to 8%. Subsequently, the Bank of Japan announced that it will step up asset purchases to 80 trillion yen on annual basis. (Read: Japan Equity Funds Attract $1B on Snap Election and Sales Tax Delay).
Fund Category Performance
Looking at the category performance data, Morningstar confirms that India equity funds have gained 44.6% year to date in the International Equity Funds category and was the biggest gainer in 2014 among all categories. It was followed by Trading-Leveraged Debt, Real Estate, Health and Long Government categories. They boasted gains of 33.4%, 28%, 27.2% and 21.7%, respectively.
India funds seem to have led the gains so far this year. investing in India has been very profitable this year. The country's key benchmarks, Sensex and Nifty, have touched all-time highs repeatedly this year. The upsurge is good news for funds that focuses on Indian companies. (Read: Stay Invested in India Mutual Funds on Bullish Growth Expectations).
India funds, being the best gainer, are also the biggest gainer among the non-US equity mutual funds. However, there are economies that have seen strong gains for their benchmarks. Despite China's economic challenges, the benchmark Shanghai Composite has gained over 40% year to date. (Read: 3 Top Performing Non-US Equity Mutual Funds in 2014)
Among the sectors, real estate funds have led the year-to-date gains followed by healthcare. The following chart depicts the performance of the Sector Equity Funds.
