Best USAA Mutual Funds for 2015
USAA is a respected financial services company that has been in business for nearly 100 years and offers a broad line of insurance and investment products including a large family of no-load mutual funds. It should be noted that investors must be members of USAA. Membership is limited to those who serve or have served in the military, plus certain family members of those service members.
Here are the top four funds based on 10-year performance combined with a Morningstar rating of five stars for the same 10-year period. Numbers are current as of 9/30/2015. The minimum investment for all of these funds is $3000. All funds are suitable for IRAs as well as general accounts.
NASDAQ-100 Index Fund (USNQX)
USNQX is a passively managed index fund that seeks to duplicate the performance of the NASDAQ-100 Index. This index consists of the 100 largest non-financial stocks traded on the NASDAQ stock exchange. The fund focuses on aggressive growth, so there is considerable volatility risk with this fund, but returns have the potential to be much higher than the overall market average. The fund invests at least 80% of its assets in the index's stocks, but has the option of investing up to 20% of its assets in cash or other securities.
The fund's 10-year annualized return is 10.24% compared with its benchmark index of 11.05%. This puts USNQX in the top 2% of funds in the same
category based on Morningstar data. The fund has a 5-star Morningstar rating. The expense ratio is 0.59%, about half that of the average expense ratio for the fund category. The top three common stock holdings of USNQX are Apple, Inc., Microsoft Corp., and Amazon.com, Inc.
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Science & Technology Fund (USSCX)
USSCX is a specialty fund that invests in specific sectors or industries. The fund will normally invest at least 80% of the Fund's assets in stocks of companies that concentrate on scientific or technological products or services. The fund may also invest up to 50% of its assets in foreign securities. Because of these two factors, the fund's risk profile is very aggressive. Investors should expect a high degree of volatility, but returns may be well above average compared with the overall stock market. Investors in this fund should have a long-term investment horizon, since large losses may be incurred in the short term.
The fund's 10-year annualized return is 9.68%, compared with its benchmark index of 6.80%. This puts USSCX in the top 19% of funds in the same category based on Morningstar data. The expense ratio is 1.24%, slightly below the average expense ratio of its peers. The top three common stock holdings of USSCX are Alphabet, Inc. Class A, Apple, Inc., and Microsoft Corp.
World Growth Fund (USAWX)
USAWX is a moderately aggressive growth fund with a global perspective. The fund invests in equities of foreign and domestic companies and may invest in companies in emerging markets. This means the fund's risk includes economic risks of the countries in which it invests, which may add to volatility. However, the fund generally invests in large capitalization stocks, which usually are less volatile than small capitalizations stocks. As an actively managed fund, there is also management risk that an investor must consider.
The fund's 10-year annualized return is 7.26% compared with its benchmark index of 4.73%. This puts USAWX in the top 6% of all funds in its category according to Morningstar data. The expense ratio is 1.17%, slightly above the average expense ratio of its peers. The top three common stock holdings of USAWX are Walt Disney Co., Time Warner, Inc., and Nestle SA.
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S&P 500 Index Fund, Member Shares (USPPX)
USPPX is a classic index fund that invests in the common stocks of the 500 largest U.S. companies and seeks to match the returns of its benchmark index, the S&P-500 Index. The risk profile is moderately aggressive only because stocks are more volatile than bonds or cash securities. The fund owns only large capitalization domestic stocks, so there is less volatility than what may be found in funds invested in small companies or international companies. The fund is passively managed, so management risk is not an issue.
The fund's 10-year annualized return is 6.56% compared with its benchmark index of 6.80%. This puts USPPX in the top 28% of all funds in its
category according to Morningstar data. The fund has a 5-star Morningstar rating. The expense ratio is 0.29%, but there is currently a 0.03% reimbursement from the fund advisor, which puts the net expense ratio at 0.26%. This is about half the average expense ratio of the fund's peers. The top three common stock holdings of USPPX are Apple, Inc., Microsoft Corp, and Exxon Mobil Corporation.
USAA's top performing funds over the past ten years show above average returns for their fund categories. Two of the funds, USSCX and USAWX, are actively managed and rank in the top ten percent in their respective categories. Low expense ratios for passively managed index funds combined with excellent management and stock selection in actively managed funds means USAA is a good choice to consider when looking for a family of funds that offer competitive returns. The one possible drawback for some investors is the membership requirements to join USAA.
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Updated on 10/26/2015.