Domestic equity mutual funds have gained the most this year compared to the last thirteen years. This has primarily occurred due to the fact that markets have touched record highs. Additionally, investors have incurred losses on bonds, which may get wider in a rising interest rate environment. This is possibly why investors have switched their loyalties to mutual funds betting on stocks.
The Triumph of Equity Mutual Funds
During only the first ten months of this year, mutual funds holding stocks witnessed inflows of $172 billion. Such a considerable inflow of funds is second only to the $272 billion received in 2000.
Despite the fact that a large portion of these funds have been directed towards international funds, domestic equity funds have cornered the highest deposits since 2004.
A Year for Cyclical Stocks
One can also consider this to be a year dominated by domestic cyclical stocks, namely financials, discretionary and technology stocks. Inflows were particularly large for these categories because of the poor performance of developing markets, which caused reverse outflows back into mature economies like the U.S.
As a result many technology focused mutual funds, which slipped in 2011 in a major way, along with other secondary sectors, have made a major comeback this year. After staging a slow recovery over last year, they have shown impressive gains only this year.
Below we are presenting three mutual funds with the best possible Zacks Rank, each of which has made major gains this year after a comparatively sluggish 2012.
Mutual Fund Picks
Rydex Internet A (RYINX)
Launched in September 2004, the fund has total assets of $40.72 million. The fund invests the majority of its assets in equity securities issued by Internet companies which are traded on domestic exchanges. The fund may also invest in derivatives, primarily futures and options as well as ADRs. It concentrates on small and mid cap domestic stocks.
The fund holds 65 assets and the asset it is most invested in is Google Inc. (GOOG), which makes up 9.78% of its assets. The next two, Amazon.com Inc. (AMZN) and Facebook, Inc. (FB), together make up 11.45% of its assets.
After a disappointing 2011, where it delivered total returns of -12.10%, the fund recovered to return 19.38% in 2012. The fund has returned an even more impressive 39.26% in 2013 and has a Zacks Rank #1 (Strong Buy).
Jacob Internet (JAMFX)
This fund has a similar size with total assets of $43.01 million and was launched in December 1999. The fund invests heavily in securities issued by companies from the Internet domain and related sectors. It focusses on acquiring common stocks and related convertible securities.
The fund holds 33 assets and its top 10 holdings account for 44.04% of its investments. The asset it is most invested in is Facebook, Inc. (FB), which makes up 6.03% of its assets. The next two, Apple Inc. (AAPL) and Ellie Mae, Inc. (ELLI), together make up 10.52% of its assets.
Following a disappointing 2011, where it delivered total returns of -9.06%, the fund recovered somewhat to return 11.44% in 2012. The fund has returned an even more impressive 34.43% in 2013 and has a Zacks Rank #1 (Strong Buy).
Fidelity Select Software and Computer Services (FSCSX)
Launched in July 1995, this is a large fund with total assets of $3 billion. The fund invests primarily in companies whose principal operations concern products and processes related to the software domain or information based services. The fund focusses on acquiring common stocks.
The fund holds 84 assets and the asset it is most invested in is Microsoft Corporation (MSFT) which makes up 14.01% of its assets. The next two, Google Inc. (GOOG) and Yahoo! Inc. (YHOO), together make up 20.09% of its assets.
After a disappointing 2011, where it delivered total returns of 2.17%, the fund recovered to return 18.05% in 2012. The fund has returned an even more impressive 35.78% in 2013 and has a Zacks Rank #2 (Buy).
Despite their modest performances in the past, these funds have delivered an impressive performance this year due to a variety of factors. This is why these make for excellent choices to add to your portfolios.
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