A very good year

Mutual fund category performance

Returns kept piling even higher in the fourth quarter of 2017 to cap a fantastic year for fund investors. Stocks around the world powered higher thanks to rising profits for businesses, and the expectation of even more growth after Congress slashed corporate tax rates. That helped the largest mutual fund by assets, Vanguard’s Total Stock Market Index fund, return 6.9 percent in the fourth quarter through Thursday. It’s the best quarterly return for the fund in four years. It’s also the ninth consecutive quarter that the fund has made money, its longest streak going back to 1998. The big gains for U.S. stock funds helped them get closer to their foreign-stock counterparts, which had made bigger gains earlier in the year. But nearly all categories of stock funds had positive returns during the fourth quarter. Bond funds had modest returns, after a rise in interest rates knocked down prices for bonds in their portfolios. The yield on the 10-year Treasury yield jumped to 2.42 percent during the quarter, up from 2.30 percent. Bond prices move in the opposite direction of their yields. The average intermediate-term bond fund, the most popular category of bond funds by assets, rose 0.14 percent. That increased its return for the year to 3.58 percent. It’s the second straight year that intermediate-term bond funds have had a positive return. Funds that focus on riskier bonds were some of the better performers. Long-term bond funds, for example, are more at risk for losses if interest rates rise, while high-yield bond funds are full of bonds issued by companies that are considered more likely to default. With the global economy strong and inflation still relatively low, though, long-term bond funds returned 2.07 percent over the last three months, and high-yield bonds 0.47 percent.