As I write this, Groundhog’s Day isn’t for another week or so. However, the Federal Reserve certainly seemed to signal that it was business as usual. Bullish investors got about the most dovish statement they could have asked for. This means stocks are likely to head back up. So why write about mutual funds?
Well for starters, inflation still remains a concern. And the Fed won’t be addressing the question of interest rates until March at the earliest.
Which means we’re likely in for business as usual. And many investors are shifting to risk-off assets. So if you’ve got money that you need to protect, or if you’re new to investing, it might be a good time to look at mutual funds.
Mutual funds are generally considered to carry less risk, but you can still tailor your selections to your investment objectives and risk profile. So, for the purpose of this article, here are a handful of mutual funds that fit different categories.
- Fidelity Select Semiconductors Portfolio (MUTF:FSELX)
- Rowe Price Global Tech Fund (MUTF:PRGTX)
- Vanguard Mid-Cap Index Fund (MUTF:VIMAX)
- Fidelity Mid Cap Index Fund (MUTF:FSMDX)
- Fidelity Total Market Index Fund (MUTF:FSKAX)
- Delaware Ivy S&P 500 Dividend Aristocrats Index Fund (MUTF:IDAAX)
- Brown Advisory Sustainable Growth Fund (MUTF:BIAWX)
We hope you’ll find one or more that suits you. But if you don’t find one on this list, Statista reported that there were 7,636 mutual funds in the United States in 2020.
7 Best Mutual Funds: Fidelity Select Semiconductors Portfolio (FSELX)
Who says mutual funds have to deliver pedestrian growth? One way to maximize the growth in a mutual fund is to invest in a sector-specific fund. And few sectors were hotter than the semiconductor sector in 2021. Semiconductor chips are used in many of the products that are leading the economy into the future: artificial intelligence, autonomous driving, the Internet of Things (IoT), and much more.
This has some analysts concerned that semiconductor stocks have peaked. However, that point of view is contradicted by others who say that the chip shortage may last into 2023 for some sectors of the economy.
With that in mind, the Fidelity Select Semiconductors Portfolio is an excellent choice to gain broad exposure to this sector. The fund’s 5-year return breaks out to a 35.06% annualized return (including dividend growth) that beats both the sector average of 26.65% and the S&P 500 Index average of 18.47%.
You’ll pay a bit more for the privilege. The FSELX fund has a total expense ratio of 0.7%, but if you’re looking for aggressive growth, the fund more than makes up for it.
T. Rowe Price Global Tech Fund (PRGTX)
If you’re interested in aggressive growth, but want exposure to a broader variety of stocks, the T. Rowe Price Global Tech Fund may be a good choice. Despite the recent sell-off in tech stocks, the tech sector will be the place for growth-minded investors to be.
This fund gives investors exposure to a cross-section of the entire tech sector. In fact, over 80% of the fund’s holding are in the technology or communications sectors. The PRGTX fund counts Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA) among its largest holdings as well as Zoom Video Communications (NASDAQ:ZM) and Roblox (NYSE:RBLX).
Not surprisingly, the fund has been down sharply since the middle of November, but prior to that, the fund was generating a 141% return over the last five years.
The total expense ratio is 0.86, but it does provide a five-year average return of 28.1% which is only slightly below the performance of the S&P 500 over that same period.
7 Best Mutual Funds: Vanguard Mid-Cap Index Fund (VIMAX)
In volatile times like this, one sound strategy is to have a base of blue-chip stocks layered with some mid-cap stocks to add growth. Mid-cap stocks are frequently some of the fastest growing because they are still in a growth phase themselves.
And a good way to gain exposure to mid-cap stocks is through mutual funds such as the Vanguard Mid-Cap Index Fund. The fund has over $154 billion in assets spread over 350 stocks. The top weighted sectors are technology (22%) and healthcare (>13%). However, the fund also provides exposure to consumer cyclical stocks such as Chipotle Mexican Grill (NYSE:CMG). And no single stock is more than 0.78% of assets.
The five-year average return is 12.18%, but that includes the latest market sell-off. The VIMAX fund has an attractive expense ratio of just 0.05%. The fund does requires a minimum investment of $3,000.
Fidelity Index Fund Mid Cap (FSMDX)
Another option as a mid-cap mutual fund is the Fidelity Index Fund Mid Cap. This fund invests in some of the best performing sectors of the market including technology, industrials, financials, and healthcare.
As an index fund, the FSMDX is designed to follow preset rules that allows the fund to track a specific basket of underlying investments. In fact, 80% of the $25.9 billion of assets in the FSMDX fund are included in the Russell Midcap Index.
As of this writing, the top four sectors by weighting are technology, industrials, consumer cyclical and financial services. The top four holding in the fund are DexCom (NASDAQ:DXCM), CrowdStrike (NASDAQ:CRWD), IDEXX Laboratories (NASDAQ:IDXX) and Marvell Technology (NASDAQ:MRVL). And no holding accounts for more than 0.51% of the fund’s assets under management.
The fund has a 0.025% expense ratio and no minimum investment requirement.
7 Best Mutual Funds: Fidelity Total Market Index Fund (FSKAX)
I may have a few mutual fund investors upset because I haven’t listed a fund that is designed to minimize fees. After all, one of the key considerations before investing in any fund is to consider the fee structure that can eat away at a fund’s total return.
That ends now. If you’re looking for an ultra-low cost mutual fund, the Fidelity Total Market Index Fund is the one for you. The fund has a 0.015% expense ratio, among the lowest you can find.
The FSKAX fund has over $77 billion of assets under management. Over 50% of the fund’s weighted holdings are in technology, financial services and healthcare. However, be advised that Big Tech, specifically, FAANG stocks make up four out of the top five fund holdings. And Microsoft (NASDAQ:MSFT) accounts for the fifth. None of the stocks accounts for more than 4.49% of the fund’s assets. Still, these tend to be among the most volatile in the tech sector.
Delaware Ivy S&P 500 Dividend Aristocrats Index Fund (IDAAX)
I have to give a cap tip towards my InvestorPlace colleague Thomas Niel for guiding me to this next fund. I wanted to present a quality fund for income-oriented investors. Right now, the flight from growth to value continues. And for many investors that means looking for stocks that pay dividends.
Niel recently wrote about the Delaware Ivy S&P 500 Dividend Aristocrats Index Fund. He was directing investors to funds they could buy to protect themselves from interest rate hikes. The first of those hikes won’t be coming until March at the earliest, but the IDAAX fund is still one to consider.
Dividend Aristocrats are a small group of stocks that consist of companies that have increased their dividend for at least 25 consecutive years. Once a company becomes a member of this club, it’s more likely that they will take steps to increase it in the future.
One feature I like about this fund is that as Neil writes it “holds each aristocrat equally within the portfolio, instead of weighing them by market capitalization.”
7 Best Mutual Funds: Brown Advisory Sustainable Growth Fund (BIAWX)
The last mutual fund I bring up can help investors who want to use their capital to support companies that score well on environmental, social and governance (ESG) initiatives. It’s too early to determine if these companies will be able to hit their goals, but for now sustainability is a key consideration for many investors.
The Brown Advisory Sustainable Growth Fund is managed by Karina Funk and David Powell. The pair look for companies that use their ESG to drive competitive advantages that lead to cost cutting and potentially increasing value and sales.
With a five-year average return of over 26.58%, you can say that it’s working. However, you should be advised that over 75% of the company’s assets (weighted by sector) are in technology, healthcare, and consumer cyclical stocks. That may not be broad enough for some investors. But if sustainability is your key driver, this is a good fund to look at.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for eight years. He has been writing for InvestorPlace since 2019.