Investors Look for Funds That Could Beat the S&P 500 in 2022

Rachel Curry - Author
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Feb. 1 2022, Published 12:27 p.m. ET

The S&P 500 finished out January with a 5.3 percent drop—its worst monthly performance since March 2020. At this point, investors aren’t depending on funds like the S&P 500 ETF (SPY). Instead, they’re looking for funds that could beat the S&P 500.

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The S&P 500 isn’t the only index struggling (the tech-heavy Nasdaq lost 8.98 percent), but it's the worst January for the S&P 500 since 2009. Here are some funds that could beat the S&P 500 in a year that’s starting out on volatile ground.

How can you beat the S&P 500?

The S&P 500 is a weighted index of 500 companies, with the top 10 companies making up about a third of the entire index. As of January, the top 10 stocks in the S&P 500 are:

  1. Microsoft (MSFT) with 6.43 percent

  2. Apple (AAPL) with 6.36 percent

  3. Amazon (AMZN) with 3.92 percent

  4. Tesla (TSLA) with 2.36 percent

  5. Alphabet Class A (GOOGL) with 2.22 percent

  6. Alphabet Class C (GOOG) with 2.09 percent

  7. Meta Platforms (FB) with 2.05 percent

  8. NVIDIA Corp. (NVDA) with 2 percent

  9. Berkshire Hathaway Class B (BRK.B) with 1.3 percent

  10. JPMorgan Chase (JPM) with 1.24 percent

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The secret to beating the S&P 500 is finding a fund with stocks that are poised to perform higher than the key holdings in the index. Naturally, this is easier said than done, but here are a few options to get you started.

The Morgan Stanley U.S. Growth Fund could recover and surpass the S&P 500.

The Morgan Stanley U.S. Growth Fund returned 88.8 percent in the year ending April 20, 2021 (compared to the S&P 500’s approximately 45 percent growth during the same time period). The fund’s seven-year return is 570 percent.

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The top companies in the fund include Snowflake (SNOW), Shopify (SHOP), Cloudflare (NET), Roblox (RBLX), and DoorDash (DASH). Volatility will likely hit the fund thanks to widespread market bearishness, but it could easily recover and surpass the S&P 500.

The T. Rowe Price U.S. Blue Chip Equity Fund has seen strong growth.

The T. Rowe Price U.S. Blue Chip Equity Fund (TRBCX) returned 33.3 percent in the year ending April 2021 and posed a 291 percent 7-year return, which is larger than the approximately 122 percent 7-year growth the S&P 500 index saw.

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The top companies in the fund include Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), and Meta Platforms (FB).

The Fidelity ZERO Large Cap Index Fund shows potential in 2022.

The fee-free Fidelity ZERO Large Cap Index Fund (FNILX) has grown 93.43 percent since March 2020. Right now, the fund is losing value at a higher rate than the S&P 500. FNILX fell 6.13 percent during January compared to the S&P 500’s 5.3 percent. However, with nearly 60 percent growth since the fund came to the market in September 2018, FNILX shows potential to outpace the S&P 500 index.

The top holdings include Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), and Tesla (TSLA). FNILX also has the benefit of a null expense ratio, which means that investors can keep their gains from the passively managed fund.

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