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Mutual fund investors seeking an entry point into the mutual funds market have an array of options to choose from, courtesy of broad-based factors that are leading the way for U.S. securities at present. After all, when one considers investing and holding onto their investments for a period of five years, one must target good gains.
Factors to Set the Pace for Next 5 Years
In order to understand what may impact the financial markets over the next five years, one must consider the trends that made presence felt recently and have the ability to make big waves in the near future.
First, a top trend that has dictated markets for a while now is the advancement in technology. Sector-specific factors, such as AI, machine learning, Big Data and cloud computing led to this rally, boosting the sector to touch record highs.
Only last year, the Technology Select Sector SPDR Fund rose (XLK) 47.9%, much of this gain is attributed to the progress in U.S.-China trade talks during the second half of the year. Nevertheless, the underlying factors in the industry are strong and are expected to drive it higher ahead.
Second, the prominent emergence of millennials and Gen Z in the U.S. homebuyer pool has been more than welcome. In 2018, millennials constituted as much as 37% of homebuyers in the country, per the National Association of Realtors.
According to realtor.com, millennials (those born between 1981 and 1997) are expected to take more than half of all mortgages this year, clearly outnumbering Gen X and Baby Boomers. Of course, the low mortgage rates (thanks to the central bank’s three rate cuts in 2019) right now are driving this new group of homebuyers. As activities in the U.S. housing market increase, the real estate sector could gain further.
Third, given the worldwide geopolitical tensions, it would be wise to consider investing in defense- and aerospace-related companies. In fact, the United States increased its war expenditures immensely under President Donald Trump’s regime. Global economies spent generously on their defense capabilities in 2019, with the year having registered the highest global military spending in a decade, per The Military Balance 2020.
Finally, as more baby boomers (those born between 1946 and 1964) head for retirement, the current moment would be a good time to opt for mutual funds, which seem ideal for retirees. After all, inadequate financial resources and lack of permanent jobs are definitive concerns for those set to retire soon. This is where allocation-balanced mutual funds come in handy. These funds offer good diversification through investments in various asset classes.
4 Best Fund Choices
We have, therefore, selected four mutual funds that invest in technology, real estate, defense and allocation-balanced mutual funds. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). In addition, the minimum initial investment for these funds 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 Advisor Technology Fund Class A (FADTX - Free Report) aims for capital appreciation. The fund invests the majority of its assets in securities of those companies that benefit greatly from advancements in technology. FADTX is a non-diversified fund that invests in mostly common stocks. The fund invests in securities of both U.S. and non-U.S. issuers. Apple, Microsoft and Visa Inc Class A are among the top holdings of FADTX.
This Zacks sector – Tech 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.
FADTX carries a Zacks Rank #1 and has an annual expense ratio of 1.03%, which is below the category average of 1.29%. It has returned 46.8% over a year. The fund has no minimum initial investment.
Franklin Real Estate Securities Fund Advisor Class (FRLAX - Free Report) invests the majority of its assets in equity securities of companies that engage in activities in the real estate industry. The fund aims to maximize total return. The fund mostly invests in companies based in the United States. American Tower, Prologis and Equinix are among the top holdings of FRLAX.
This Zacks sector – Real Estate 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.
FRLAX carries a Zacks Rank #1 and has an annual expense ratio of 0.75%, which is below the category average of 1.22%. It has returned 20.1% over a year. The fund has no minimum initial investment.
USAA Managed Allocation Fund aims to increase its total return, which mostly consists of capital growth. The fund primarily invests in U.S. and non-U.S. equity securities and fixed-income securities through investments in shares of other investment companies. These may include ETFs and real estate securities etc.
This Zacks sector – Allocation Balanced 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.
UMAFX carries a Zacks Rank #1 and has an annual expense ratio of 0.76%, which is below the category average of 1.40%. It has returned 9.7% over a year. The fund has no minimum initial investment.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) fund aims for capital growth. The fund invests the majority of its assets in securities of companies engaged in the research, manufacture or sale of products or services related to the defense or aerospace industries. The non-diversified fund mostly invests in common stocks of companies. Boeing, Northrop Grumman and TransDigm Group are among the top holdings of FSDAX.
This Zacks sector – Other 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.
FSDAX carries a Zacks Rank #2 and has an annual expense ratio of 0.75%, which is below the category average of 1.10%. It has returned 22.5% over a year. The fund has no minimum initial investment.
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4 Funds to Buy and Hold for the Next 5 Years
Mutual fund investors seeking an entry point into the mutual funds market have an array of options to choose from, courtesy of broad-based factors that are leading the way for U.S. securities at present. After all, when one considers investing and holding onto their investments for a period of five years, one must target good gains.
Factors to Set the Pace for Next 5 Years
In order to understand what may impact the financial markets over the next five years, one must consider the trends that made presence felt recently and have the ability to make big waves in the near future.
First, a top trend that has dictated markets for a while now is the advancement in technology. Sector-specific factors, such as AI, machine learning, Big Data and cloud computing led to this rally, boosting the sector to touch record highs.
Only last year, the Technology Select Sector SPDR Fund rose (XLK) 47.9%, much of this gain is attributed to the progress in U.S.-China trade talks during the second half of the year. Nevertheless, the underlying factors in the industry are strong and are expected to drive it higher ahead.
Second, the prominent emergence of millennials and Gen Z in the U.S. homebuyer pool has been more than welcome. In 2018, millennials constituted as much as 37% of homebuyers in the country, per the National Association of Realtors.
According to realtor.com, millennials (those born between 1981 and 1997) are expected to take more than half of all mortgages this year, clearly outnumbering Gen X and Baby Boomers. Of course, the low mortgage rates (thanks to the central bank’s three rate cuts in 2019) right now are driving this new group of homebuyers. As activities in the U.S. housing market increase, the real estate sector could gain further.
Third, given the worldwide geopolitical tensions, it would be wise to consider investing in defense- and aerospace-related companies. In fact, the United States increased its war expenditures immensely under President Donald Trump’s regime. Global economies spent generously on their defense capabilities in 2019, with the year having registered the highest global military spending in a decade, per The Military Balance 2020.
Finally, as more baby boomers (those born between 1946 and 1964) head for retirement, the current moment would be a good time to opt for mutual funds, which seem ideal for retirees. After all, inadequate financial resources and lack of permanent jobs are definitive concerns for those set to retire soon. This is where allocation-balanced mutual funds come in handy. These funds offer good diversification through investments in various asset classes.
4 Best Fund Choices
We have, therefore, selected four mutual funds that invest in technology, real estate, defense and allocation-balanced mutual funds. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). In addition, the minimum initial investment for these funds 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 Advisor Technology Fund Class A (FADTX - Free Report) aims for capital appreciation. The fund invests the majority of its assets in securities of those companies that benefit greatly from advancements in technology. FADTX is a non-diversified fund that invests in mostly common stocks. The fund invests in securities of both U.S. and non-U.S. issuers. Apple, Microsoft and Visa Inc Class A are among the top holdings of FADTX.
This Zacks sector – Tech 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.
FADTX carries a Zacks Rank #1 and has an annual expense ratio of 1.03%, which is below the category average of 1.29%. It has returned 46.8% over a year. The fund has no minimum initial investment.
Franklin Real Estate Securities Fund Advisor Class (FRLAX - Free Report) invests the majority of its assets in equity securities of companies that engage in activities in the real estate industry. The fund aims to maximize total return. The fund mostly invests in companies based in the United States. American Tower, Prologis and Equinix are among the top holdings of FRLAX.
This Zacks sector – Real Estate 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.
FRLAX carries a Zacks Rank #1 and has an annual expense ratio of 0.75%, which is below the category average of 1.22%. It has returned 20.1% over a year. The fund has no minimum initial investment.
USAA Managed Allocation Fund aims to increase its total return, which mostly consists of capital growth. The fund primarily invests in U.S. and non-U.S. equity securities and fixed-income securities through investments in shares of other investment companies. These may include ETFs and real estate securities etc.
This Zacks sector – Allocation Balanced 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.
UMAFX carries a Zacks Rank #1 and has an annual expense ratio of 0.76%, which is below the category average of 1.40%. It has returned 9.7% over a year. The fund has no minimum initial investment.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) fund aims for capital growth. The fund invests the majority of its assets in securities of companies engaged in the research, manufacture or sale of products or services related to the defense or aerospace industries. The non-diversified fund mostly invests in common stocks of companies. Boeing, Northrop Grumman and TransDigm Group are among the top holdings of FSDAX.
This Zacks sector – Other 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.
FSDAX carries a Zacks Rank #2 and has an annual expense ratio of 0.75%, which is below the category average of 1.10%. It has returned 22.5% over a year. The fund has no minimum initial investment.
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