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3 Financial Mutual Funds to Buy Amid Rate Cut Uncertainty
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Wall Street has been volatile over the past week as inflation and interest rate hikes have been worrying investors. The minutes of the Federal Open Market Committee’s (FOMC) Apr 30-May 1 policy meeting revealed that the Federal Reserve is in no rush to cut interest rates.
The Federal Reserve remains concerned that inflation isn’t declining sharply enough and several officials are in favor of increasing interest rates if required.
Inflation declined for the first time this year in April after increasing in the first three months of the year. The consumer price index (CPI) rose 0.3% sequentially in April, lower than the consensus estimate of a rise of 0.4%. Year over year, CPI increased 3.4%, which came in line with analysts’ expectations.
Core CPI, which excludes the volatile food and energy prices, rose 3.6% in April from the year-ago levels and 0.3% from the prior month, both in line with estimates. The core year-over-year reading was the lowest since April.
However, inflation is still sharply above the Fed’s 2% target. Also, the U.S. GDP grew just 1.6% in the first quarter after expanding 3.4% in the fourth quarter of 2023.
High inflation has raised concerns that the Federal Reserve could delay its interest rate cuts, dampening hopes of multiple rate cuts this year.
During times of high interest rates, various institutions in the banking sector, such as retail banks, commercial banks, investment banks, insurance companies, and brokerages, generally see increased profitability. This is because higher lending rates result in higher earnings for these institutions, leading to wider spreads between the federal overnight fund rate and the rates they charge their customers.
3 Best Choices
We've identified three financial mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
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 Banking Portfolio (FSRBX - Free Report) fund seeks capital appreciation by investing the majority of its net assets in common stocks of companies principally engaged in banking. For its investment purposes, FSRBX uses fundamental analysis of factors like financial condition and industry position, as well as market and economic conditions. Fidelity Select Banking Portfolio fund offers dividends and capital gains in April and December.
Fidelity Select Banking Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSRBX’s returns over the three and five-year benchmarks are 0.3% and 5.7%, respectively. The annual expense ratio of 0.77% is lower than the category average of 1.24%. FSRBX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
T. Rowe Price Financial Services (PRISX - Free Report) fund invests most of its assets, along with borrowings, if any, in common stocks of financial services companies and others conducting business in the financial services industry, such as financial software providers. PRISX advisors select stocks based on companies’ fundamental and bottom-up analysis that seeks quality companies with good appreciation prospects.
T. Rowe Price Financial Services fund has a track of positive total returns for over 10 years. Specifically, PRISX’s returns over the three and five-year benchmarks are 6.6% and 12.4%, respectively. The annual expense ratio of 0.83% is lower than the category average of 1.10%. PRISX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
Davis Financial (RPFGX - Free Report) fund seeks long-term growth of capital by investing the majority of its net assets in common stocks issued by companies engaged in providing financial services to consumers and industry. RPFGX offers dividends and capital gains annually.
Davis Financial fund has a track of positive total returns for over 10 years. Specifically, RPFGX’s returns over the three and five-year benchmarks are 5.8% and 9%, respectively. RPFGX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.95%
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
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3 Financial Mutual Funds to Buy Amid Rate Cut Uncertainty
Wall Street has been volatile over the past week as inflation and interest rate hikes have been worrying investors. The minutes of the Federal Open Market Committee’s (FOMC) Apr 30-May 1 policy meeting revealed that the Federal Reserve is in no rush to cut interest rates.
The Federal Reserve remains concerned that inflation isn’t declining sharply enough and several officials are in favor of increasing interest rates if required.
Inflation declined for the first time this year in April after increasing in the first three months of the year. The consumer price index (CPI) rose 0.3% sequentially in April, lower than the consensus estimate of a rise of 0.4%. Year over year, CPI increased 3.4%, which came in line with analysts’ expectations.
Core CPI, which excludes the volatile food and energy prices, rose 3.6% in April from the year-ago levels and 0.3% from the prior month, both in line with estimates. The core year-over-year reading was the lowest since April.
However, inflation is still sharply above the Fed’s 2% target. Also, the U.S. GDP grew just 1.6% in the first quarter after expanding 3.4% in the fourth quarter of 2023.
High inflation has raised concerns that the Federal Reserve could delay its interest rate cuts, dampening hopes of multiple rate cuts this year.
During times of high interest rates, various institutions in the banking sector, such as retail banks, commercial banks, investment banks, insurance companies, and brokerages, generally see increased profitability. This is because higher lending rates result in higher earnings for these institutions, leading to wider spreads between the federal overnight fund rate and the rates they charge their customers.
3 Best Choices
We've identified three financial mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
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 Banking Portfolio (FSRBX - Free Report) fund seeks capital appreciation by investing the majority of its net assets in common stocks of companies principally engaged in banking. For its investment purposes, FSRBX uses fundamental analysis of factors like financial condition and industry position, as well as market and economic conditions. Fidelity Select Banking Portfolio fund offers dividends and capital gains in April and December.
Fidelity Select Banking Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSRBX’s returns over the three and five-year benchmarks are 0.3% and 5.7%, respectively. The annual expense ratio of 0.77% is lower than the category average of 1.24%. FSRBX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
T. Rowe Price Financial Services (PRISX - Free Report) fund invests most of its assets, along with borrowings, if any, in common stocks of financial services companies and others conducting business in the financial services industry, such as financial software providers. PRISX advisors select stocks based on companies’ fundamental and bottom-up analysis that seeks quality companies with good appreciation prospects.
T. Rowe Price Financial Services fund has a track of positive total returns for over 10 years. Specifically, PRISX’s returns over the three and five-year benchmarks are 6.6% and 12.4%, respectively. The annual expense ratio of 0.83% is lower than the category average of 1.10%. PRISX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
Davis Financial (RPFGX - Free Report) fund seeks long-term growth of capital by investing the majority of its net assets in common stocks issued by companies engaged in providing financial services to consumers and industry. RPFGX offers dividends and capital gains annually.
Davis Financial fund has a track of positive total returns for over 10 years. Specifically, RPFGX’s returns over the three and five-year benchmarks are 5.8% and 9%, respectively. RPFGX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.95%
To see how this fund performed compared to its category, and other #1 or 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 >>