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4 Top-Performing Sectoral Funds of Q3

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Major indexes wobbled through most of Q3, influenced largely by a string of factors that pulled and pushed the markets in equal measure. In the third quarter, the S&P 500 gained 0.4% while the Dow Jones and the Nasdaq Composite suffered losses of 0.5% and 2.3%, respectively.

Despite such lackluster performances by the markets, a few sectors stood out and surpassed market expectations. Betting on mutual funds from these sectors seems prudent at this juncture.

Top-Performing Sectors of Q3

The third quarter started on a positive note for Wall Street, thanks to the continuation of the longest bull run in history. Ongoing trade tensions between the United States and China, and concerns over a global economic slowdown weighed on the markets throughout the third quarter.

Nevertheless, U.S. markets partly recovered after the Federal Reserve announced a second interest rate cut in September. Also, the market watchers remained hopeful of positive outcomes on the trade war front which kept markets afloat.

Although major sectors of the broader S&P 500 performed well on a year-to-date basis, only a few could keep up in the third quarter. Notably, technology, utilities, real estate and consumer staples posted impressive gains during the said period.

Utilities Select Sector SPDR Fund (XLU) gained the most during the third quarter (8.6%) followed by The Real Estate Select Sector SPDR Fund (XLRE), which gained 6.3%. Consumer Staples Select Sector SPDR Fund (XLP) and Technology Select Sector SPDR Fund (XLK) added 4.9% and 1.6%, respectively.

Our Choices

We have, therefore, selected four mutual funds that invest in the aforementioned sectors. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date 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).

PGIM Jennison Utility Fund- Class A (PRUAX - Free Report) aims for total return by combining capital growth and current income. The fund invests the majority of its assets in equity and related securities, and investment-grade debt securities of utility companies. PRUAX is a non-diversified fund.

This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRUAX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.83%, which is below the category average of 1.12%. It has returned 24.6% on a year-to-date basis. PRUAX has a minimum initial investment of $2500.

Davis Real Estate Fund Class A (RPFRX - Free Report) seeks total return by combining income and growth. The fund invests the majority of its assets in securities of companies engaged in activities in the real estate industry. The fund mostly invests in common stocks of U.S. companies and may also invest in non-U.S. companies.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

RPFRX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.97%, which is below the category average of 1.20%. It has returned 26.4% on a year-to-date basis. RPFRX has a minimum initial investment of $1000.

Red Oak Technology Select Fund (ROGSX - Free Report) aims for capital appreciation over the long term. The fund mostly invests its assets in equity securities of companies engaged in operations in the technology sector. The fund invests in both U.S. and non-U.S. stocks.

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 carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.94%, which is below the category average of 1.28%. It has returned 22.7% on a year-to-date basis. ROGSX has a minimum initial investment of $2000.

Fidelity Select Consumer Staples Portfolio (FDFAX - Free Report) fund aims for capital appreciation. The fund invests the majority of its assets in securities of companies that are engaged in activities related to the manufacture, marketing and/or distribution of consumer staples. FDFAX mostly invests in common stocks.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDFAX carries a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.77%, which is below the category average of 1.19%. It has returned 25% on a year-to-date basis. FDFAX has no minimum initial investment.

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