3 Mutual Funds to Buy on Robust Housing Data – May 17, 2019

Per the latest joint report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, housing starts and building permits for April came in at 1.24 million and 1.3 million units, respectively. While housing starts increased 6% in April, building permits advanced about 1% in the same period.

Homebuilding for March was revised up to 1.17 million units, instead of a decline to 1.14 million units reported initially. Such a surge has primarily been attributed to growth in both multi- and single-family house constructions. Under such favorable circumstances, investing in real estate mutual funds would make for a prudent investment decision.

Starts and Permits Nudge Higher

Single-family home building surged 6.2% last month. This provided the major boost to new homebuilding as well as sales. Further, multifamily home construction rose 2.3% to 359,000 in April. Such a spike was pivotal in driving housing starts higher last month.

Meanwhile, multi-family units single-handedly boosted the building permits in April. Permits for the construction of multi-family homes rebounded 8.9% to 514,000 units in the last month.

Homebuilder Confidence at a 7-Month High

Per the report dated May 15 by the National Association of Home Builders (NAHB), homebuilders’ confidence rose to its highest settlement since October. The rise came on the back of declining mortgage rates, moderating home prices as well as higher home sales.

The Housing Market Index (HMI) reading gained three points to 66 in May from 63 in April. Notably, any reading of more than 50 signals improving conditions.

3 Best Choices

Given such circumstances, we have highlighted three real estate mutual funds that are poised to gain from such factors. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 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).

DFA Real Estate Securities Portfolio Institutional Class (DFREX Free Report) invests in marketable equity securities of companies engaged in ownership, management, development, construction and sale of residential, commercial as well as industrial real estate. DFREX normally invests in equity securities of companies in certain real estate investment trusts as well as companies involved in residential construction.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 7.8% and 9%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

DFREX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.18%, which is below the category average of 1.22%.

TIAA-CREF Real Estate Securities Retirement (TRRSX Free Report) seeks maximum total returns over the long run through growth of capital and current income. TRRSX invests a large chunk of its assets in companies primarily involved in operations related to the real estate domain. The fund may invest a maximum of 15% of its assets in securities issued by foreign entities.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 8.9% and 9.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

TRRSX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.22%.

John Hancock II Real Estate Securities 1 (JIREX Free Report)  seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which includes REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 7.4% and 8.6%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

JIREX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.22%.

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