2 Mutual Funds to Gain from an Uptick in Consumer Confidence – May 27, 2020

Confidence of Americans in the country’s economy jumped in May, mostly led by the optimism over businesses and stores reopening around the United States. In addition, consumers remained hopeful of a coronavirus vaccine hitting the markets soon, which could drive business activity further in the country.

Mutual fund investors could bank on this optimism by choosing in a couple of funds that invest in sectors which are most likely to gain as consumer activity picks up with an economy gathering steam.

Consumer Confidence Recovers in May

On May 26, the Conference Board reported a comeback in consumer confidence among Americans for May. The index improved to 86.6 in May, marking an increase from 85.7 in April. In fact, this is the first time the index rose since its decline in March and the month after.

The closely watched index of American consumers’ outlook toward the economy was pushed by a pickup in expectations for the next six months, the Conference Board on Tuesday. According to Lynn Franco, the Conference Board’s senior director of economic indicators, the free fall in confidence stopped in May after undergoing two months of rapid decline.

After almost all business houses closed in March, economies across all 50 states have started to reopen gradually. The unexpected business shutdowns led to the worst recession in modern history, with 20.5 million jobs lost last month and as many as 10 million more expected to be lost in May.

2 Funds to Buy

We have, therefore, selected two mutual funds that could gain ahead, given the fact that the U.S. economy is reopening. 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 Select Leisure Portfolio (FDLSX Free Report) fund aims for capital appreciation. The fund normally invests the majority of its assets in common stocks of companies that are mostly engaged in the design, production, or distribution of goods or services in the leisure industries. 

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.

FDLSX has an annual expense ratio of 0.76%, which is below the category average of 1.27%. It has returned 3.3% over the past three years. The fund has no minimum initial investment. FDLSX carries a Zacks Mutual Fund Rank #1.

Fidelity Select Consumer Discretionary Portfolio (FSCPX Free Report) fund aims for capital growth. The fund invests the majority of its assets in securities of companies that are mostly engaged in the manufacture and distribution of consumer discretionary products and services.

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.

FSCPX has an annual expense ratio of 0.76%, which is below the category average of 1.27%. It has returned 9.5% over the past three years. The fund has no minimum initial investment. FSCPX carries a Zacks Mutual Fund Rank #2.

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