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3 Funds to Add to Your Portfolio Amid Ongoing Market Volatility
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Markets remained volatile last week and are on track to end lower this week. Stocks have been scrambling for direction since the beginning of the month after closing out July with solid gains. The S&P 500 jumped 3.1%, while the Dow and the Nasdaq added 3.4% and 4.1%, respectively.
However, investors’ sentiments were dented after the Fed decided to resume interest rates by another 25 basis points and kept itself open for more hikes depending on economic data. Also, inflation, which had been steadily declining, rose once again in July. Given this situation, it would be wise to invest in defensive funds like utilities such as Fidelity Advisor Utilities Fund (FUGAX - Free Report) , Fidelity Select Utilities Growth Portfolio (FSUTX - Free Report) and Fidelity Telecom and Utilities Fund (FIUIX - Free Report) .
Multiple Factors Unsettle Markets
Stocks rallied in July on positive inflation data that raised optimism that the Fed could soon end its current monetary tightening cycle. However, markets have been showing volatility since the Fed resumed its interest rate hike on Jul 26. The 25-basis point interest hike was widely expected but the Fed is open to more hikes this year.
The Fed has hiked interest rates by 525 basis points since March 2022, taking the federal funds rate to the range of 5.25-5.5%.
Concerns grew further after Fitch Ratings downgraded the U.S. long-term foreign-currency issuer default rating from AAA to AA+ earlier this month. If that was not enough, earlier this week, Moody’s downgraded the credit ratings of 10 medium-sized regional lenders.
Moody’s cited deposit risk, struggling commercial real estate portfolios and fears of a potential recession as reasons for the downgrade. The credit rating agency also placed six other banks on review for potential downgrades.
This raised concerns about the health of the nation’s banks and economy. Stocks have since been taking a beating.
Also, fresh data released on Aug 10 showed that inflation rose in July. Both Consumer Price Index (CPI) and Core CPI, which strips out the volatile energy and food prices, rose 0.2% in July. Although the rise is marginal, it gives enough reason for the Fed to continue its rate hikes.
Increased interest rates will lead to higher borrowing costs, raising concerns about the economy entering a recession.
It would thus be wise to consider investing in utility funds at this juncture. The utility sector is fundamentally mature and sound owing to the stable demand for their services, even during changes in the economic cycle.
These companies offer essential services like telecommunications, energy, gas, and water, which are consistently needed. Thus, adding companies from the utility basket often increases a portfolio’s resilience, even during market volatility. Utilities are also known for their reliable and transparent track record of profits and cash flows.
3 Best Choices
We have selected three mutual funds with significant exposure to the utility sector. The funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the 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 fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also 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 Utilities Fund seeks capital appreciation. FUGAX normally invests at least 80% of assets in securities of companies principally engaged in the utility industry and companies deriving a majority of their revenues from their operations.
Fidelity Advisor Utilities Fund has a history of positive total returns for more than 10 years. Specifically, FUGAX has returned nearly 11.4% and 7.7% over the past three and five-year periods, respectively. Fidelity Advisor Utilities Fundhas a Zacks Mutual Fund Rank #2.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Utilities Growth Portfolio fund seeks capital appreciation by investing most of its net assets in securities of domestic and foreign companies engaged in the utility business and earning the majority of their revenues from utility operations. FSUTX advisors use a fundamental approach like financial condition, industry position, as well as market and economic conditions to select investments.
Fidelity Select Utilities GrowthPortfolio fund has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned nearly 11.8% and 8.3% over the past three and five-year periods, respectively. Fidelity Select Utilities Growth Portfolio fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Telecom and Utilities Fund seeks high total return through a combination of current income and capital appreciation. FIUIX invests primarily in common stocks, with at least 80% of assets in securities of utility companies. Fidelity Telecom and Utilities Fund invests in domestic and foreign issuers.
Fidelity Telecom and Utilities Fund has a history of positive total returns for more than 10 years. Specifically, FIUIX has returned nearly 7.9% and 6.4% over the past three and five-year periods, respectively. Fidelity Telecom and Utilities Fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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3 Funds to Add to Your Portfolio Amid Ongoing Market Volatility
Markets remained volatile last week and are on track to end lower this week. Stocks have been scrambling for direction since the beginning of the month after closing out July with solid gains. The S&P 500 jumped 3.1%, while the Dow and the Nasdaq added 3.4% and 4.1%, respectively.
However, investors’ sentiments were dented after the Fed decided to resume interest rates by another 25 basis points and kept itself open for more hikes depending on economic data. Also, inflation, which had been steadily declining, rose once again in July. Given this situation, it would be wise to invest in defensive funds like utilities such as Fidelity Advisor Utilities Fund (FUGAX - Free Report) , Fidelity Select Utilities Growth Portfolio (FSUTX - Free Report) and Fidelity Telecom and Utilities Fund (FIUIX - Free Report) .
Multiple Factors Unsettle Markets
Stocks rallied in July on positive inflation data that raised optimism that the Fed could soon end its current monetary tightening cycle. However, markets have been showing volatility since the Fed resumed its interest rate hike on Jul 26. The 25-basis point interest hike was widely expected but the Fed is open to more hikes this year.
The Fed has hiked interest rates by 525 basis points since March 2022, taking the federal funds rate to the range of 5.25-5.5%.
Concerns grew further after Fitch Ratings downgraded the U.S. long-term foreign-currency issuer default rating from AAA to AA+ earlier this month. If that was not enough, earlier this week, Moody’s downgraded the credit ratings of 10 medium-sized regional lenders.
Moody’s cited deposit risk, struggling commercial real estate portfolios and fears of a potential recession as reasons for the downgrade. The credit rating agency also placed six other banks on review for potential downgrades.
This raised concerns about the health of the nation’s banks and economy. Stocks have since been taking a beating.
Also, fresh data released on Aug 10 showed that inflation rose in July. Both Consumer Price Index (CPI) and Core CPI, which strips out the volatile energy and food prices, rose 0.2% in July. Although the rise is marginal, it gives enough reason for the Fed to continue its rate hikes.
Increased interest rates will lead to higher borrowing costs, raising concerns about the economy entering a recession.
It would thus be wise to consider investing in utility funds at this juncture. The utility sector is fundamentally mature and sound owing to the stable demand for their services, even during changes in the economic cycle.
These companies offer essential services like telecommunications, energy, gas, and water, which are consistently needed. Thus, adding companies from the utility basket often increases a portfolio’s resilience, even during market volatility. Utilities are also known for their reliable and transparent track record of profits and cash flows.
3 Best Choices
We have selected three mutual funds with significant exposure to the utility sector. The funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the 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 fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also 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 Utilities Fund seeks capital appreciation. FUGAX normally invests at least 80% of assets in securities of companies principally engaged in the utility industry and companies deriving a majority of their revenues from their operations.
Fidelity Advisor Utilities Fund has a history of positive total returns for more than 10 years. Specifically, FUGAX has returned nearly 11.4% and 7.7% over the past three and five-year periods, respectively. Fidelity Advisor Utilities Fundhas a Zacks Mutual Fund Rank #2.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Utilities Growth Portfolio fund seeks capital appreciation by investing most of its net assets in securities of domestic and foreign companies engaged in the utility business and earning the majority of their revenues from utility operations. FSUTX advisors use a fundamental approach like financial condition, industry position, as well as market and economic conditions to select investments.
Fidelity Select Utilities GrowthPortfolio fund has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned nearly 11.8% and 8.3% over the past three and five-year periods, respectively. Fidelity Select Utilities Growth Portfolio fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Telecom and Utilities Fund seeks high total return through a combination of current income and capital appreciation. FIUIX invests primarily in common stocks, with at least 80% of assets in securities of utility companies. Fidelity Telecom and Utilities Fund invests in domestic and foreign issuers.
Fidelity Telecom and Utilities Fund has a history of positive total returns for more than 10 years. Specifically, FIUIX has returned nearly 7.9% and 6.4% over the past three and five-year periods, respectively. Fidelity Telecom and Utilities Fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>