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3 Growth Mutual Funds to Boost Your Portfolio Returns

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Data from Personal Consumption Expenditures (PCE), the Fed’s favorite inflation gauge, released last week provides insights into the price trends of the U.S. economy. The year-over-year PCE price index showed a 2.5% increase in February, up from 2.4% in January, while core PCE, which excludes food and energy prices rose by 2.8% in February compared to a 2.9% rise in January.

Federal Reserve Chair Jerome Powell recently discussed the cautious approach policymakers are taking regarding interest rate adjustments. Powell highlighted that recent economic data allows some flexibility for policymakers to decide on when to implement interest rate cuts. "This means we don't have to rush into cutting rates," he mentioned during an interview at the San Francisco Fed, emphasizing a strategy toward policy changes.

According to futures data from the Chicago Mercantile Exchange (CME), there is a growing probability of a 25-basis point rate cut at the Federal Open Market Committee (FOMC) meeting scheduled for June with chances increasing from around 55% to 60% after the data release.

The Department of Commerce reported that U.S. GDP grew 3.4% in fourth-quarter 2023, beating the consensus estimate of 3.2%. The University of Michigan stated that the consumer sentiment index, for March was finalized at 79.4%, surpassing both the expected estimate and the initial reading of 76.5% from March.

Given the current economic landscape and lower inflation, choosing to invest in growth funds could be a favorable decision for investors. These funds offer investment portfolios and opportunities, for growth while maintaining risk management effectively.

Thus, from an investment standpoint, we have selected three growth mutual funds that are expected to hedge one's portfolio against any economic downturn and provide attractive returns. Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

These mutual funds, by the way, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.

BlackRock Exchange BlackRock (STSEX - Free Report) seeks to minimize capital gains by investing most of its net assets in a diversified portfolio of common stocks and convertible securities, which according to its advisors, have high growth potential. STSEX advisors prefer to invest in large and mid-cap companies.

Phil Ruvinsky has been the lead manager of STSEX since Feb 1, 2020. Most of the fund’s holdings were in companies like Microsoft Corp (33.4%), Berkshire Hathaway Inc. (11.6%) and General Dynamics Corp. (8.8%) as of Dec 31, 2023.

STSEX’s 3-year and 5-year annualized returns are 16.1% and 16%, respectively. STSEX has a Zacks Mutual Fund Rank #1. Its net expense ratio is 0.62%.

To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.

Principal MidCap Fund (PEMGX - Free Report) seeks long-term growth by investing primarily in common stocks and other equity securities of medium-capitalization companies that its advisors believe offer above-average growth potential. 

K. William Nolin has been the lead manager of PEMGX since Dec 6, 2000. Most of the fund's holdings were in companies like Copart, Inc. (5.6%), TransDigm Group, Inc (5.5%), and O'Reilly Automotive, Inc. (5%) as of Oct 31, 2023.

PEMGX's 3-year and 5-year returns are 8.3% and 13.3%, respectively. PEMGX has a Zacks Mutual Fund Rank #1. Its net expense ratio is 0.95%.

Northern Small Cap Core Fund (NSGRX - Free Report) invests most of its assets in equity securities of small-cap companies falling within the market capitalization range of those included on the Russell 2000 Index at the time of investment.

Michael R. Hunstad has been the lead manager of NSGRX since Jul 30, 2020. Most of the fund's holdings were in companies like Northern Institutional Funds U.S. Government Select Portfolio (1.8%), Super Micro Computer, Inc. (0.5%) and Comfort Systems USA, Inc. (0.4%) as of Dec 31, 2023.

NSGRX's 3-year and 5-year returns are 2.6% and 8.1%, respectively. NSGRX has a Zacks Mutual Fund Rank #2. The annual expense ratio is 0.59%.

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