Increase in interest rates, maturing business cycle and a new president is the present situation in the United States of America. One thing is for certain that the investors will have a challenging situation. In the stock market, be it bull or bear, everyone will have their share of underperformers and outperformers. One has to find the outperformers to make money. Let’s have a look at some of the top mutual fund investments for the year.
Vanguard 500 Index Fund (VFINX): VFINX falls under broad index type and focuses on core holding. Annual expense for every $10,000 invested is 0.16%, and the minimum initial investment is $3,000.VFINX provides a low-cost exposure to the equity market. VFINX offers exposure to 500 of the largest U.S companies which spread across different industries. VFINX concentrates on U.S large cap stocks like Apple Inc., Alphabet Inc., and Microsoft.
Fidelity Nasdaq Composite Index Fund (FNCMX): FNCMX is a broad index mutual fund with an annual expense of 0.29% on every $10,000 invested. The Initial minimum investment is $2,500. As the business cycle is maturing, it’s best to consider some broad growth exposure, and FNCMX is the perfect option for that. Although value-oriented funds offer greater stability in the environment which is volatile, growth stocks are the overall winners when the interest rates are high, and the economy is healthy. Large-cap stocks like Amazon.com, Facebook, Apple, Microsoft are among the top holdings.
Vanguard Health Care (VGHCX): Falling under the healthcare sector type, VGHCX has an annual expense of 0.36%. The minimum initial investment $3,000. With Donald Trump becoming the president, health care sector received a boost. VGHCX offers exposure to biotech stocks, although they form only 15% of the fund. Other segments are healthcare equipment and managed health care services. VGHCX provides value for shareholders and are good for defensive plays and is a safer option if the market begins to fall.
Fidelity Select Banking (FSRBX): Falling under the banking type, FSRBX has an expense of 0.79% and a minimum initial Investment $2,500. Financial stocks have become attractive ever since Trump became the president. With the current environment, financial stocks like FSRBX could become a great success.
Fidelity Select Consumer Staples Fund (FDFAX): Falling under consumer staples sector, FDFAX has an annual expense of 0.77% and an initial investment of $2,500. Adding consumer staples to the portfolio is an excellent way to diversify. 2016 was a bad year for consumer staples stock, the sector is at break even. 2017 seems to be a successful year for such stocks. Top holdings include British American Tobacco, Procter & Gamble and CVS health group.
Vanguard Energy Fund (VGENX): Falling under energy sector, VGENX has an annual expense of 0.37% and has a minimum initial investment of $3,000. If this stock goes without any serious changes, it is going to be one of the top performers. Although the momentum might have decreased, VGENX is still attractive. If Iran plays hardball, the demand will increase, and the supply will go down, and the stock prices of VGENX will go up.
T. Rowe Price Floating Rate Fund (PRFRX): PRFRX is a floating rate bond, and the annual expense is around 0.79%. The minimum initial investment is $2,500. Bond prices may go down and will see negative returns if the rates rise. PRFRX is a smart choice in such situations as they aren’t traditional bond index funds. Floating rate bonds adjust themselves to the fluctuating rates, and their rates are tied to a benchmark. Floating rate bonds may appreciate during an increase in the interest rates.
Vanguard Short-Term Investment-Grade Fund (VFSTX): VFSTX is a corporate bond and has an annual expense of 0.2%. The minimum initial investment is $3,000. VFSTX is a smart option if the economy remains healthy and the interest rates rise steadily. With the rise in interest rates, bond prices go down, and all the long-term bonds are hit drastically. However, short-term bonds like VFSTX are less sensitive to a change in interest rate. If the economy remains healthy, one can reap high yield and stability with funds like VFSTX.
Hussman Strategic Total Return Fund (HSTRX): HSTRX is tactical allocation fund with an annual expense of 0.79% and a minimum initial investment of $1,000. Hedge against inflation is minimizing the market risk with little or no effort from one’s end, HSTRX is the right choice. Primarily consisting of the fixed income securities, the fund assets are moved to cash stocks or commodity-based securities. HSTRX has 50% in cash, 40% in bonds and 10% in stocks.
Vanguard Balance Index Funds (VBINX): A balanced fund of annual expense 0.22%. VBINX has a minimum initial investment of $3,000. This year marked the success of passive funds as compared to active fund; hence it is best to consider balanced funds. Balanced funds allocate to both stocks and bonds. VBINX is the best option for those who want to play on both the sides of the risk-return fence.
Factors like performance ranking, ratio analysis, total expense ratio, fund manager tenure and experience, scheme asset size should be analyzed before opting for a mutual fund investment.
