U.S. mutual funds have witnessed steady growth in assets under management during President Donald Trump’s first year in office. Despite persistent doubts over the President’s ability to pass key political reforms, U.S. equity funds have registered strong inflows.
Moreover, optimism over Trump’s infrastructure development and tax reform policies, indications from the Fed about an imminent rate hike and an encouraging earnings season are expected to attract investors toward U.S. stock funds for a considerable time. Following these recent gains, the addition of domestic equity mutual funds to one’s portfolio might prove one of the most suitable investment options at this point of time.
U.S. Stock Funds Rally Upward
On Trumpiversary, data showed that U.S. equity mutual funds witnessed strong growth during the first year of this presidency. According to Lipper data, total assets under management for domestic equity funds (including ETFs) jumped 16.1% to close at $21.1 trillion for the twelve-month period ending Sep 30.
Additionally, equity mutual funds, including both domestic and global funds, witnessed the highest percentage increase among the six major asset types. Equity mutual funds rose 21.6% to $11.4 trillion, with two key Lipper Macro-Groups, U.S. diversified equity funds and sector funds increasing 26.7% and 16.9%, respectively.
One-Year Performance Details Through Oct. 3 By Lipper Macro-Groups
|Emerging Markets Funds||27%|
|Developed International Markets Funds||25.4%|
|World Taxable Fixed Income Funds||5%|
|Taxable Fixed Income Funds||3.4%|
Solid Inflows Contribute Most to Funds’ Asset Growth
Since Sep 30, 2016, U.S. mutual funds have attracted $691.2 billion of inflows, of which $686 billion have been invested in passively managed funds. Investors clearly favour U.S. equity funds, which got reflected after the asset types registered strong inflows.
Fund flow in U.S. equity funds was quite strong after investors shifted their focus more toward the passively managed equity funds over the actively managed funds. While $498.5 billion was added to passively managed equity funds, active funds registered outflows of $236 billion. Also, passively managed bond funds experienced $191.3 billion of inflows.
Buy These 6 Best-Performing U.S. Stocks Funds
Strong asset growth and steady inflows in U.S. equity funds on the first year of Trump’s Presidency calls for investors’ attention to six mutual funds that sport a Zacks Mutual Fund Rank #1 (Strong Buy). These equity funds also have impressive year-to-date (YTD) returns. Also, these funds have a low expense ratio and their minimum initial investment is within $5000.
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.
DFA Tax-Managed US Small Cap invests a bulk of its assets in equity securities of small-cap domestic companies. DFTSX seeks appreciation of capital for the long run as well as reduction of federal income taxes on returns.
DFTSX has an annual expense ratio of 0.52%, which is below the category average of 1.22%. The fund has one-month and three-month returns of 0.8% and 4.9%, respectively. The fund allocates more than 99% of its assets in U.S. stocks.
Fidelity Select Technology FSPTX seeks capital growth over the long run. FSPTX invests a large chunk of its assets in common stocks of companies primarily involved in production, development and sale of products used for technological advancement. The fund invests in both U.S. and non-U.S. companies. Factors including financial strength and economic condition are considered before investing in a company.
FSPTX has an annual expense ratio of 0.76%, which is below the category average of 1.42%. The fund has YTD returns of 54% and allocates more than 71.5% of its assets in U.S. stocks.
T. Rowe Price Value TRVLX seeks growth of capital for the long run by investing mainly in undervalued common stocks. TRVLX invests heavily in companies from different market-cap range, but focuses mainly in large-cap companies.
TRVLX has an annual expense ratio of 0.82%, which is below the category average of 1.10%. The fund has YTD returns of 15.5% and allocates 91.6% of its assets in U.S. stocks.
T. Rowe Price Capital Opportunity PRCOX invests the major portion of its assets in companies that are listed on the S&P 500 Index. PRCOX is expected to maintain company weights similar to the index. Though PRCOX invests in companies throughout the globe irrespective of market capitalization, it primarily focuses on acquiring common stocks of domestic large-cap firms.
PRCOX has an annual expense ratio of 0.70%, which is below the category average of 1.03%. The fund has YTD returns of 20.1% and allocates 96.4% of its assets in U.S. stocks.
John Hancock II Real Estate Securities Fund Class 1 JIREX seeks long-term capital growth and current income. JIREX invests the lion's share of its net assets in equity securities of domestic real estate companies and REITs. The fund may invest nearly 10% of its total assets in securities of non-U.S. real estate companies.
JIREX has an annual expense ratio of 0.79%, which is below the category average of 1.14%. The fund has YTD returns of 6.2% and allocates 97.4% of its assets in U.S. stocks.
Vanguard Value Index Investor VIVAX invests nearly all its assets in stocks of companies included on the CRSP US Large Cap Value Index. VIVAX seeks to replicate the performance of the index by investing a proportion of its assets in each stock as its weighting in the index.
VIVAX has an annual expense ratio of 0.18%, which is below the category average of 1.10%. The fund has YTD returns of 11.4% and allocates 98.8% of its assets in U.S. stocks.
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