3 Best Mid-Cap Funds to Buy in a Promising Economy – July 7, 2020

Investors have become quite optimistic lately, thanks to a reopened economy and a string of economic indicators that are pointing toward strong economic recovery in the country. Financial markets have been, therefore, reflecting this optimism. This is why now would be the ideal time to gather these gains by investing in the right mutual funds.

Markets Are Up, Economic Data Promising

With the number of new coronavirus cases rising, the number of infected people in the country has reached 2.91 million. Despite the gloomy reality, economic recovery is underway. Taking a closer look at the country’s three major indexes, one may note that equities have gained strength over the past three months, which encompasses the period during which all 50 states started to reopen their economies.

The Dow Jones Industrial Average, the broader S&P 500 and the tech-laden Nasdaq Composite have gained 13.9%, 19.4% and 29% respectively over the past three months. In addition, crucial economic data such as consumer spending, new job additions, factory activity and housing data have been very encouraging.

First, according to the Commerce Department, consumer spending in the country rebounded strongly in May, jumping 8.2%. May’s rise was the largest jump since the government started tracking the series in 1959. The data is very impressive, also considering that consumer spending had declined by a historic 12.6% in April.

Second, new job additions in May and June have been remarkable. As many as 2.5 million new jobs were added in May and 4.8 million were added in June per the data by the Labor Department, indicating the fast recovery in the economy.

Third, after three months of contraction, U.S. manufacturing activity finally rebounded strongly in June. According to the Institute for Supply Management’s (ISM) report, manufacturing activity in the United States hit its highest level in more than a year as the economy reopened. The ISM’s index of national factory activity hit a reading of 52.6 in June from 43.1 in May. June’s uptick was the strongest since April 2019.

Finally, according to the U.S. Census Bureau and Department of Housing and Urban Development, new residential sales for May (reported at 676,000) were 16.6% higher than the revised April rate of 580,000. In addition, the said figure is 12.7% higher than the year-ago period’s estimate of 600,000.

Why Investing in Mid-Cap Funds is Ideal Right Now

Given investors’ optimism around economic recovery in the country, it would be ideal to bank on the thought. In a bid to do so, one would need to take a somewhat safer stance nonetheless.

Since large-capitalization companies usually have operations spanning across countries, these aren’t an ideal choice in the current scenario. The scope of risk is too large with investments in large-capitalization companies right now.

One may not consider small-capitalization companies as well, since these are the businesses that were affected the most during the lockdown. However, given the rising number of infections in the country, small-scale businesses could be affected again.

This leaves medium-capitalization companies to ponder over. These companies are more financially well-off than the small-capitalization ones, which makes them ideal for growth. Second, these may not have extensive international operations, which make them safer to invest in. This is why mutual fund investors could find mid-cap funds ideal investment options right now.

3 Funds to Buy

We have, therefore, selected three mid-cap mutual funds that stand to gain in the current market scenario. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong 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).

BlackRock Mid-Cap Growth Equity Portfolio Investor A Shares (BMGAX Free Report) aims for long-term capital growth. The fund invests the majority of its assets in securities of medium-capitalization companies based in the United States. The fund mostly invests in those companies that its management believes have above-average potential for earnings growth. The fund primarily invests in common stocks but may also invest in preferred stock, convertible securities and other equity securities.

This Zacks sector – Mid Cap Growth 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.

BMGAX has an annual expense ratio of 1.05%, which is below the category average of 1.16%. It has returned 19.1% over the past year. The fund has a minimum initial investment of $1000.

JPMorgan Mid Cap Equity Fund Class A (JCMAX Free Report) aims for long-term capital appreciation. The fund invests the majority of its assets in equity securities of medium-capitalization companies. It considers those as mid-cap companies that have market capitalizations equal to those within the range of the Russell Midcap Index securities at the time of purchase.

This Zacks sector – Mid Cap Blend 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.

JCMAX has an annual expense ratio of 1.14%, which is below the category average of 1.16%. It has returned 6.7% over the past year. The fund has a minimum initial investment of $1000.

Hartford MidCap HLS Fund Class IA (HIMCX Free Report) aims for long-term capital growth. The fund invests the majority of its assets in common stocks of mid-capitalization companies. Itd manager defines mid-capitalization companies as those that have market capitalization similar to the companies included on the Russell Midcap and S&P MidCap 400 indexes.

This Zacks sector – Mid Cap Blend 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.

HIMCX has an annual expense ratio of 0.70%, which is below the category average of 1.16%. It has returned 5.4% over the past year. The fund has no minimum initial investment.

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