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3 Growth Funds to Boost Your Portfolio as Rate Cut Hopes Brighten
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Investors are hopeful that the Federal Reserve could soon cut interest rates on positive data released last week. The optimism comes as inflation is finally showing signs of easing, while the labor market is also cooling.
Last week, the Labor Department reported an uptick in the unemployment rate and a slowdown in new job creation. The report also showed that nonfarm payrolls increased by just 206,000 in June. This is sharply lower than the downwardly revised May figures of 218,000, from the previously reported 272,000.
The unemployment rate climbed to 4.1% in June after rising to 4% in May. Also, wages rose just 3.9% in June on a year-over-year basis. This was the smallest gain since June 2021. Wage growth in a 3-3.5% range is considered consistent with the Federal Reserve’s inflation target of 2%.
The Fed hiked interest rates by 525 basis points since March 2022 to curb 40-year high inflation. Although inflation has declined sharply over the past year, the Fed has struggled to bring inflation down to its 2% target amid a tight labor market.
Although new job additions remain high, it has declined substantially from record highs and is finally showing signs of cooling, while a slowdown in wage growth has raised optimism that the central bank might be able to check inflation without the economy slipping into a recession.
The Federal Reserve said last month that it now sees a single rate cut this year, substantially less the three projected in March.
However, even a single 25 basis point rate cut is good news because a large section of the market participants believed there wouldn't be any rate cuts this year. Also, the latest FOMC "dot plot" predicts a 1% total reduction in interest rates by 2025. According to this forecast, the Fed funds rate is expected to fall to 4.1% by the end of 2025, which is positive for the overall economy.
Therefore, investors who prioritize capital appreciation over dividend payouts might consider investing in growth mutual funds. These funds usually have a mix of large, mid, and small-cap stocks that are expected to grow in value over a long period.
Our Choices
As a result, we've chosen three growth funds that are worth buying. These funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Bridgeway Aggressive Investors (BRAGX - Free Report) fund invests most of its net assets in common stocks of companies, irrespective of their size, listed on the New York Stock Exchange, NYSE American and NASDAQ. BRAGX advisors may also invest in stocks for which there is relatively low market liquidity, as periodically determined by the adviser based on the stock's trading volume.
Bridgeway Aggressive Investors fund has a track of positive total returns for over 10 years. Specifically, BRAGX’s returns over the three and five-year benchmarks are 5.3% and 11%, respectively. BRAGX has an annual expense ratio of 0.43% and 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.
Fidelity New Millennium Fund (FMILX - Free Report) seeks capital appreciation. FMILX focuses on identifying industries and companies that will benefit from social and economic change by examining social attitudes, legislative actions, economic plans, product innovation, demographics and other factors, which can lead to investments in small and medium-sized companies.
Fidelity New Millennium Fund has a track of positive total returns for over 10 years. Specifically, FMILX’s returns over the three and five-year benchmarks are 13.4% and 16.4%, respectively. FMILX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.86%, which is lower than its category average of 0.91%.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
Putnam Sustainable Leaders A (PNOPX - Free Report) fund seeks long-term capital appreciation. PNOPX invests mainly in common stocks of U.S. companies, with a focus on growth stocks in sectors of the economy that have high growth potential.
Putnam Sustainable Leaders A fund has a track of positive total returns for over 10 years. Specifically, PNOPX’s returns over the three and five-year benchmarks are 7.7% and 15.6%, respectively. PNOPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.43%, which is lower than its category average 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 Growth Funds to Boost Your Portfolio as Rate Cut Hopes Brighten
Investors are hopeful that the Federal Reserve could soon cut interest rates on positive data released last week. The optimism comes as inflation is finally showing signs of easing, while the labor market is also cooling.
Last week, the Labor Department reported an uptick in the unemployment rate and a slowdown in new job creation. The report also showed that nonfarm payrolls increased by just 206,000 in June. This is sharply lower than the downwardly revised May figures of 218,000, from the previously reported 272,000.
The unemployment rate climbed to 4.1% in June after rising to 4% in May. Also, wages rose just 3.9% in June on a year-over-year basis. This was the smallest gain since June 2021. Wage growth in a 3-3.5% range is considered consistent with the Federal Reserve’s inflation target of 2%.
The Fed hiked interest rates by 525 basis points since March 2022 to curb 40-year high inflation. Although inflation has declined sharply over the past year, the Fed has struggled to bring inflation down to its 2% target amid a tight labor market.
Although new job additions remain high, it has declined substantially from record highs and is finally showing signs of cooling, while a slowdown in wage growth has raised optimism that the central bank might be able to check inflation without the economy slipping into a recession.
The Federal Reserve said last month that it now sees a single rate cut this year, substantially less the three projected in March.
However, even a single 25 basis point rate cut is good news because a large section of the market participants believed there wouldn't be any rate cuts this year. Also, the latest FOMC "dot plot" predicts a 1% total reduction in interest rates by 2025. According to this forecast, the Fed funds rate is expected to fall to 4.1% by the end of 2025, which is positive for the overall economy.
Therefore, investors who prioritize capital appreciation over dividend payouts might consider investing in growth mutual funds. These funds usually have a mix of large, mid, and small-cap stocks that are expected to grow in value over a long period.
Our Choices
As a result, we've chosen three growth funds that are worth buying. These funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Bridgeway Aggressive Investors (BRAGX - Free Report) fund invests most of its net assets in common stocks of companies, irrespective of their size, listed on the New York Stock Exchange, NYSE American and NASDAQ. BRAGX advisors may also invest in stocks for which there is relatively low market liquidity, as periodically determined by the adviser based on the stock's trading volume.
Bridgeway Aggressive Investors fund has a track of positive total returns for over 10 years. Specifically, BRAGX’s returns over the three and five-year benchmarks are 5.3% and 11%, respectively. BRAGX has an annual expense ratio of 0.43% and 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.
Fidelity New Millennium Fund (FMILX - Free Report) seeks capital appreciation. FMILX focuses on identifying industries and companies that will benefit from social and economic change by examining social attitudes, legislative actions, economic plans, product innovation, demographics and other factors, which can lead to investments in small and medium-sized companies.
Fidelity New Millennium Fund has a track of positive total returns for over 10 years. Specifically, FMILX’s returns over the three and five-year benchmarks are 13.4% and 16.4%, respectively. FMILX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.86%, which is lower than its category average of 0.91%.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
Putnam Sustainable Leaders A (PNOPX - Free Report) fund seeks long-term capital appreciation. PNOPX invests mainly in common stocks of U.S. companies, with a focus on growth stocks in sectors of the economy that have high growth potential.
Putnam Sustainable Leaders A fund has a track of positive total returns for over 10 years. Specifically, PNOPX’s returns over the three and five-year benchmarks are 7.7% and 15.6%, respectively. PNOPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.43%, which is lower than its category average 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 >>