14 Elite Funds and ETFs, and 5 Popular Funds That Just Missed the Mark

Finance-focused summary (from the subtitles)

The video is an interview about Morningstar’s annual Fund Investor newsletter selection process for “Exciting/Outstanding” funds, covering both mutual funds and ETFs. The guest, Russ Kinnell, explains how Morningstar’s screening narrows thousands of share classes to a few dozen using a small set of high-predictive “tests.” The discussion highlights specific funds, with emphasis on risk level, diversification, and each fund’s likely portfolio role.

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Notable changes to the newsletter methodology

• Morningstar combined mutual funds and ETFs in the Fund Investor framework.
• Added ~200 ETFs to its data pages.
• Positioning: they “pool funds” to compare funds, stocks, and ETFs together (rather than focusing only on individual stocks).

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Screening / selection framework (explicit methodology)

Morningstar states there are 7 mandatory requirements for a fund to be included:

• Morningstar medalist status
• In the cheapest quintile in its category
• Parent company rating above average
• Not high risk (screened out if risk is too high)
• Manager investment must be > $1 million
• Not a fund of funds
• Minimum investment threshold ≤ $50,000

Additional explanation

• Instead of “20 tests,” Morningstar runs only a few key tests with the best predictive value.
• They set a higher bar, reducing the final set to a few dozen.

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Funds highlighted as “exciting” / passing the audit (with portfolio and risk notes)

Dodge & Cox (all passed; unusual)

Dodge & Cox Balanced

• Allocation: ~60% stocks / ~40% fixed income
• Fixed income focus: investment-grade corporate bonds, mortgage loans, and treasury securities
• Takeaway: intended as a more moderate portfolio than a pure stock fund

Dodge & Cox Emerging Markets Stock

• Timeline: launched about 5 years ago; first time on the list
• Approach: fundamental value plus a quantitative method
• Goal: broader exposure across emerging markets, including small and mid-cap equities
• Takeaway: more diversified (more names), but consistent with Dodge & Cox’s style

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ETFs included for the first time

Fidelity Blue Chip Growth ETF

• Positioning: “blue chip growth,” but > half of the fund is technology
• Managed by: Sonu Kalon
• Caution: described as aggressive—expect downturns before investing

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Small-/mid-cap / higher-aggression equity options

Primecap Odyssey Aggressive Growth

• Aggressive style with a deeper team
• Historically looked at biotech and technology

Vanguard Explorer

• More diversified structure via five sub-advisors
• Emphasized as having a very low expense ratio
• Contrast: described as “almost bordering on an index fund,” compared with Primecap’s more aggressive/volatile profile

When asked which to choose, Russ says he owns Primecap Odyssey Aggressive Growth.

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Dividend/value large-cap funds (American Funds)

• American Funds Washington Mutual
• American Funds American Mutual

Key points:

• Core theme: dividend strategy
• Claim: they don’t “chase yield” to the point of taking excessive risk
• Goal: balance capital appreciation and dividend yield
• Emphasis: supported by fundamental research and strong stock selection

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Large-cap blended (T. Rowe Price)

T. Rowe Price US Equity Research (large-cap blended)

• Framed as an “unexpected candidate”
• Rationale: beating the index takes “bravery,” but this fund is analyst-managed
• Process: analysts define sectors; industry experts pick stocks; then they combine into a diversified portfolio
• Benchmark behavior: said to track fairly closely to the S&P 500, but outperform over time

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Bond ETFs (risk and credit exposure)

• TCW Flexible Income ETF
• Neuberger Short Duration Income ETF

Key discussion points:

• Mutual-to-ETF evolution: both began as mutual funds, later became ETFs
• Differentiator: both take a lot of risk, especially credit risk
• Compared with typical short-term funds (often mostly investment grade):
  • Neuberger: “a little more aggressive,” with more high yield
  • Both can invest across multi-sector income, including high yield and foreign bonds
• Takeaway: characterized as aggressive, though “doing very well”

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Global large-cap blended / ESG

American Funds Capital World Growth and Income

• Emphasis on high total returns
• Dividend niche plus potential for capital growth

Vanguard Global ESG Select Stock

• Managed by Wellington as a sub-advisor
• Uses large-cap mixed-company fundamentals plus an ESG layer
• Focus includes companies with high return on investment and being “responsible stewards”
• Claim: “so far it’s working well”

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Municipal bond fund options (tax-exempt)

• Vanguard Intermediate Term Tax-Exempt
• Baird Intermediate Municipal Bond

Framing and attributes:

• Presented as “basic high-quality municipal funds”
• Attributes: low expense, well-diversified
• Tone: intended to feel lower-stress (“sleep easy”)

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Funds that “just missed” / were excluded (with reasons)

The video contrasts highlighted funds with popular options that did not make the list:

• Fidelity Contrafund

  • Reason: Will Danoff retiring at the end of the year
  • Inclusion requirement: manager must have at least 5 years of experience; retirement means it fails criteria

• American Funds New Economy

  • Reason: “fell a little below” on efficiency figures and had a sluggish year

• Vanguard trio excluded despite strong returns this year:

  • Vanguard Capital Opportunity
  • Vanguard Prime Cap
  • Vanguard Prime Cap Core
  • Reason: higher than average risk rating (high Morningstar risk rating)
  • Policy note: Morningstar screens out high-risk funds because investors are “better suited” to moderate-risk funds

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How viewers can check funds against the criteria

• Use the described tests/articles published later, or
• Use the fund selection tool on the Morningstar Fund Investor website

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Key numbers and thresholds mentioned

• ~200 ETFs added to Morningstar data pages
• Dodge & Cox Balanced allocation: ~60% stocks / ~40% fixed income
• Primecap vs. Vanguard Explorer: qualitative comparison (no numeric expense ratio given in the subtitles)
• Screening thresholds (explicit “mandatory requirements”):
  • Manager investment > $1,000,000
  • Min investment ≤ $50,000
  • Cheapest quintile requirement
• Manager tenure rule mentioned for Contrafund:
  • At least 5 years of experience

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Disclosures / disclaimers noted

• Russ Kinnell: “doesn’t use any notes”
• The subtitles do not show a formal legal “not financial advice” disclaimer.
• The video is framed as investment commentary about a fund selection process, not personalized advice.

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Tickers / assets / instruments mentioned (explicit)

The subtitles mention fund names but do not provide ETF tickers or share classes. Referenced instrument categories include:

• Stocks
• Fixed income
• Investment-grade corporate bonds
• Mortgage loans
• Treasury securities
• High yield bonds
• Foreign bonds
• Municipal bonds (tax-exempt)
• ESG screens
• Benchmark: S&P 500

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Presenters / sources

• Ivana Hampton (host; Morningstar)
• Russ Kinnell (newsletter editor and Morningstar’s chief ratings officer)
• Morningstar Fund Investor / Morningstar Fund Investor newsletter
• Christine Benz and Amy Arnott (mentioned as co-hosts for a future episode)
• Erin Moriarty (mentioned as a guest for next episode)