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3 Mutual Funds to Buy Amid Positive Trade Deal Vibes

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Wall Street gained in Dec 12 trading, owing to investor optimism around an affirmative solution to U.S.-China trade dispute.

A news report claiming that China was planning to allow more foreign companies to access to its domestic market and President Donald Trump’s proposal to intervene in a legal case involving Chinese giant Huawei helped in lifting market sentiment.

A trade deal between the United States and China would be extremely beneficial to large-cap technology stocks. Therefore, it would be ideal to invest in a few mutual funds from the sector.

Trump’s Huawei Statement Boosts Investor Sentiment

On Dec 11, Trump offered to intervene in a legal case that involves arrest of Huawei’s chief financial officer Meng Wanzhou, during an interview with Reuters. The President’s comments helped boost financial markets in anticipation of a trade war resolution.

Wanghou, who had been arrested in Vancouver by Canada on Washington’s behest earlier this month, was released on bail on Dec 11 and is due to appear before a court on Feb 6. Beijing had been enraged at Wanghou’s arrest and protested, leaving investors fearing a possible impediment to trade negotiations.

Chinese Market Entry to Foreign Businesses to Propel Stocks

In addition, China’s proposal to replace its ambitious Made in China 2025 program and allow foreign businesses greater access to the Chinese market is a promising move toward a trade agreement, per a Wall Street Journal report.

The policy had been criticized at length by the Trump administration, citing China’s protectionist attitude toward its domestic companies. Chinese President Xi Jinping had aimed to encourage indigenous tech companies, intending to make China a leader in cutting edge technologies.  

A new policy could raise fewer eyebrows in Washington, which has criticized Beijing for its inability to protect intellectual property rights, as well as forcible handover of crucial technological advances.

According to consensus, tech stocks, that incurred huge losses since the commencement of the trade war in July could be positioned for a significant rebound if a trade deal is sealed. Further, greater access to China’s domestic market would be hugely beneficial to American tech majors.

Consequently, technology stocks such as Apple and Facebook, which were beaten hard in the past few weeks and electronic chipmakers could see a nice turnaround.

Mutual Funds to Buy

Given the recent positive developments in the U.S.-China trade negotiations, betting on mutual funds with exposure to technology companies is ideal.

We have selected funds which carry Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-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).

Fidelity Select Semiconductors Portfolio (FSELX - Free Report) seeks capital growth by investing primarily in securities of companies that are engaged in design, and manufacture of semiconductors and related equipment. The fund invests in U.S, as well as non-U.S.-based companies. NVIDIA Corporation, Broadcom Inc. and Applied Materials  are among its top 10 holdings.

This Zacks sector – Tech 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.

FSELXhas a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.74%, which is below the category average of 1.30%. The fund has three and five-year returns of 18.8% and 21%, respectively.

Fidelity Select Computer (FDCPX - Free Report) boosts its capital by investing 80% of its funds in companies that are pursuing research, manufacture, development, design and distribution of hardware technology related to computer industry. The fund invests in domestic and foreign companies. Apple, Sony Corporation and Samsung Electronics Co. are its top three holdings.

This Zacks sector – Tech 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.

FDCPXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%, which is below the category average of 1.30%. The fund has three and five-year returns of 15% and 10.1%, respectively.

Red Oak Technology Select Portfolio (ROGSX - Free Report) seeks capital growth by investing 80% of its net assets in securities of technology-sector companies. Microsoft Corp, Alphabet Inc. and Amazon.com Inc. are its top three holdings.

This Zacks sector – Tech 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.

ROGSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.97%, which is below the category average of 1.30%. The fund has three and five-year returns of 21% and 16.8%, respectively.

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