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U.S. financial markets bounced back after suffering a major setback in the fourth quarter, thanks to Fed’s dovish stance, speedier developments on U.S.-China trade deal and better-than-expected manufacturing numbers from both United States and China.
The current positive scenario is ideal to venture into aggressive growth funds, given the significant gains noted by the S&P Midcap 400 Index and the small-cap Russell 2000 in the first quarter.
But why should you focus on these two indexes? This is because aggressive growth funds invest in equity securities of companies that have high scope of growth. Therefore, these funds tend to invest the majority of their assets in companies that can offer better and aggressive growth as compared to others. This investment strategy makes small and medium market capitalization businesses ideal from an investment perspective.
The first quarter of 2019 wasn’t just the best quarter for the broader S&P 500 Index since 2012, small- and mid-cap indexes gained considerably as well. The S&P Midcap 400 Index and Russell 2000 Index have gained 16% and 15.4%, respectively, on a year-to-date basis. This reflects the growth attained by small- and mid-cap companies in the said timeframe.
In addition, U.S. financial markets have been thriving on the reviving economies of both China and America. The Chinese government pushed 560 billion yuan (about $83 billion) into its banking system in January to stimulate its slowing economy, CNBC reported. This measure has acted as a catalyst to boost U.S. stocks, along with stabilizing China’s economy.
Both U.S. and China recorded improved manufacturing activity recently. In fact, the Asian nation’s Caixin China manufacturing purchasing managers index rose to 50.8 in March from 49.9 in February, indicating growth in manufacturing activity. In the United States, the Institute for Supply Management's manufacturing index noted a stronger-than-expected 55.3% in March, up from 54.2% in February.
Apart from the aforementioned factors, faster-than expected developments to reach a trade deal are making their presence felt in the financial markets as well. Positive news on U.S.-China trade talks have rekindled hopes for a trade agreement in the near-term. Earlier this week, China’s State Council stated that it will suspend additional tariffs on U.S. autos and auto parts, to “create a good atmosphere for the continuing trade negotiations between both sides,” a Reuters report cited. Trade talks between the two nations will resume in Washington this week.
Lastly, Fed’s accommodative policy on interest rates is inducing lower downside volatility in stocks, which means that stocks are unlikely to incur steep losses at present. The central bank decided to keep rate hikes at bay (currently in the range of 2.25-2.50%) amid rising fears over global growth slowdown. In fact, the Fed has decided not to pursue any further rate hikes this year. This factor offers further reasons to invest in aggressive growth funds.
Our Choices
We have selected a few aggressive growth mutual funds that you could consider adding to your portfolio. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging one and three-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
BlackRock Advantage Small Cap Growth Fund Investor A Shares (CSGEX - Free Report) seeks capital growth over a long period. The fund invests the majority of its assets in equity securities of small-cap companies at least 80% of its net assets in instruments and securities of U.S.-based companies.
This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSGEX has an annual expense ratio of 0.75%, which is below the category average of 1.20%. The fund has three and five-year returns of 18.1% and 7.2%, respectively. CSGEX has a minimum initial investment of $1000.
ClearBridge Small Cap Growth Fund Class 1 (LMPMX - Free Report) aims for long-term capital appreciation. The fund opts for a growth-oriented investment strategy and invests a majority of its assets in equity securities of small-cap companies.
This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
LMPMX has an annual expense ratio of 0.93%, which is below the category average of 1.20%. The fund has three and five-year returns of 23.2% and 8.7%, respectively. LMPMX has no minimum initial investment.
Commerce MidCap Growth Fund (CFAGX - Free Report) seeks capital growth. The fund invests at least 80% of its net assets and any borrowings for investment purposes in common stocks of mid-cap companies. The fund specifically invests in stocks of companies that have had below-average price volatility in the past.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CFAGX has an annual expense ratio of 0.84%, which is below the category average of 1.19%. The fund has three and five-year returns of 15.7% and 10.8%, respectively. CFAGX has a minimum initial investment of $1000.
MFS Mid Cap Growth Fund Class R4 (OTCJX - Free Report) aims for capital appreciation by investing most of its net assets in securities of mid-cap companies. MFS usually defines medium market capitalization issuers as those with market capitalizations equivalent to that of issuers included in the Russell Midcap Growth Index over the last one year and one month at the time of purchase.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
OTCJX has an annual expense ratio of 0.88%, which is below the category average of 1.19%. The fund has three and five-year returns of 18.5% and 11.2%, respectively. OTCJX has no minimum initial investment.
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4 Aggressive Growth Funds to Buy in Q2
U.S. financial markets bounced back after suffering a major setback in the fourth quarter, thanks to Fed’s dovish stance, speedier developments on U.S.-China trade deal and better-than-expected manufacturing numbers from both United States and China.
The current positive scenario is ideal to venture into aggressive growth funds, given the significant gains noted by the S&P Midcap 400 Index and the small-cap Russell 2000 in the first quarter.
But why should you focus on these two indexes? This is because aggressive growth funds invest in equity securities of companies that have high scope of growth. Therefore, these funds tend to invest the majority of their assets in companies that can offer better and aggressive growth as compared to others. This investment strategy makes small and medium market capitalization businesses ideal from an investment perspective.
The first quarter of 2019 wasn’t just the best quarter for the broader S&P 500 Index since 2012, small- and mid-cap indexes gained considerably as well. The S&P Midcap 400 Index and Russell 2000 Index have gained 16% and 15.4%, respectively, on a year-to-date basis. This reflects the growth attained by small- and mid-cap companies in the said timeframe.
In addition, U.S. financial markets have been thriving on the reviving economies of both China and America. The Chinese government pushed 560 billion yuan (about $83 billion) into its banking system in January to stimulate its slowing economy, CNBC reported. This measure has acted as a catalyst to boost U.S. stocks, along with stabilizing China’s economy.
Both U.S. and China recorded improved manufacturing activity recently. In fact, the Asian nation’s Caixin China manufacturing purchasing managers index rose to 50.8 in March from 49.9 in February, indicating growth in manufacturing activity. In the United States, the Institute for Supply Management's manufacturing index noted a stronger-than-expected 55.3% in March, up from 54.2% in February.
Apart from the aforementioned factors, faster-than expected developments to reach a trade deal are making their presence felt in the financial markets as well. Positive news on U.S.-China trade talks have rekindled hopes for a trade agreement in the near-term. Earlier this week, China’s State Council stated that it will suspend additional tariffs on U.S. autos and auto parts, to “create a good atmosphere for the continuing trade negotiations between both sides,” a Reuters report cited. Trade talks between the two nations will resume in Washington this week.
Lastly, Fed’s accommodative policy on interest rates is inducing lower downside volatility in stocks, which means that stocks are unlikely to incur steep losses at present. The central bank decided to keep rate hikes at bay (currently in the range of 2.25-2.50%) amid rising fears over global growth slowdown. In fact, the Fed has decided not to pursue any further rate hikes this year. This factor offers further reasons to invest in aggressive growth funds.
Our Choices
We have selected a few aggressive growth mutual funds that you could consider adding to your portfolio. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging one and three-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
BlackRock Advantage Small Cap Growth Fund Investor A Shares (CSGEX - Free Report) seeks capital growth over a long period. The fund invests the majority of its assets in equity securities of small-cap companies at least 80% of its net assets in instruments and securities of U.S.-based companies.
This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSGEX has an annual expense ratio of 0.75%, which is below the category average of 1.20%. The fund has three and five-year returns of 18.1% and 7.2%, respectively. CSGEX has a minimum initial investment of $1000.
ClearBridge Small Cap Growth Fund Class 1 (LMPMX - Free Report) aims for long-term capital appreciation. The fund opts for a growth-oriented investment strategy and invests a majority of its assets in equity securities of small-cap companies.
This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
LMPMX has an annual expense ratio of 0.93%, which is below the category average of 1.20%. The fund has three and five-year returns of 23.2% and 8.7%, respectively. LMPMX has no minimum initial investment.
Commerce MidCap Growth Fund (CFAGX - Free Report) seeks capital growth. The fund invests at least 80% of its net assets and any borrowings for investment purposes in common stocks of mid-cap companies. The fund specifically invests in stocks of companies that have had below-average price volatility in the past.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CFAGX has an annual expense ratio of 0.84%, which is below the category average of 1.19%. The fund has three and five-year returns of 15.7% and 10.8%, respectively. CFAGX has a minimum initial investment of $1000.
MFS Mid Cap Growth Fund Class R4 (OTCJX - Free Report) aims for capital appreciation by investing most of its net assets in securities of mid-cap companies. MFS usually defines medium market capitalization issuers as those with market capitalizations equivalent to that of issuers included in the Russell Midcap Growth Index over the last one year and one month at the time of purchase.
This Zacks sector – Mid Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
OTCJX has an annual expense ratio of 0.88%, which is below the category average of 1.19%. The fund has three and five-year returns of 18.5% and 11.2%, respectively. OTCJX has no minimum initial investment.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>