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4 Best Performing Mutual Funds of 2018

Zacks Equity Research

Despite a great start to 2018, the bull run in U.S. markets showed some slack towards the later part of the year. Having said that, for most part of last year, the U.S. economy was healthy. However, broader geopolitical concerns and the trade war with China weighed on markets.

Meanwhile, better-than-expected economic data and healthy sectoral performance kept the markets afloat. Large-cap and healthcare stocks particularly performed well. Under such circumstances, adding large-cap and healthcare mutual funds to one’s portfolio seems prudent.

Large-Cap Growth and Healthcare Funds Led the Way

Historically, when markets turn jittery, large-cap growth stocks outperform small-caps as well as mid-cap ones. The reason behind a rally in large-cap growth stocks is that such stocks benefit immensely from strong earnings and expectations that they will perform well even if the economy slows down. The U.S. economy, by the way, is expected to slow down to an annualized growth rate of 2.3% this year from 3% in 2018.

Thus, large-cap growth funds not only had the best year-to-date returns in 2018 among nine Morningstar Style Box categories of funds, such funds are further poised to gain traction this year.

Healthcare funds, in the meantime, performed the best among sector funds. For the record, the Health Care Select Sector SPDR ETF (XLV) gained 2.5% between Jan 2 and Dec 31, 2018. Market uncertainties forced investors to invest in relatively stable sectors like healthcare.

4 Best Funds Of 2018

Given such circumstances, we have highlighted four mutual funds from the aforesaid winning areas carrying 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).

Goldman Sachs Large Cap Growth Insights Fund GSCLX seeks capital growth over the long run. The fund invests a major portion of its assets in large-cap companies, including U.S. and non-U.S. entities.

This Sector – Large Cap Growth product has a history of positive total returns for over 10 years. Specifically, the fund has returned 12.1% over the three-year and 12.5% over the five-year benchmarks. Also, the fund has returned 4.8% over the past year. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here. 

The Goldman Sachs Large Cap Growth Insights fund, managed by Goldman Sachs, has a Zacks Mutual Fund Rank #1 and carries an expense ratio of 1.05%.  Moreover, GSCLX requires a minimal initial investment of $0.

Vanguard US Growth Investor VWUSX invests in large-cap stocks of seasoned U.S. companies exhibiting stupendous growth. The fund chooses companies with a strong position in their respective markets and reasonable financial strength. VWUSX seeks appreciation of capital in the long run.

This Sector – Large Cap Growth product has a history of positive total returns for over 10 years. Specifically, the fund has returned 13% over the three-year and 12.9% over the five-year benchmarks. Also, the fund has returned 11.3% over the past year. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here. 

The Vanguard US Growth Investor fund, managed by Vanguard Group, has a Zacks Mutual Fund Rank #2 and carries an expense ratio of 0.42%.  Moreover, VWUSX requires a minimal initial investment of $3,000.

Fidelity Select Medical Equipment and Systems Portfolio FSMEX invests the bulk of its assets in securities of companies that focus on research, development, manufacture, distribution, supply, or sale of medical equipment and devices and related technologies. The fund invests in securities of U.S. and non-U.S. companies.

This Sector – Health product has a history of positive total returns for over 10 years. Specifically, the fund has returned 20.8% over the three-year and 19.3% over the five-year benchmarks. Also, the fund has returned 22.7% over the past year. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here. 

The Fidelity Select Medical Equipment and Systems Portfolio fund, managed by Fidelity, has a Zacks Mutual Fund Rank #1 and carries an expense ratio of 0.75%.  Moreover, FSMEX requires a minimal initial investment of $2,500.

T. Rowe Price Health Sciences PRHSX invests a major portion of its net assets in common stocks of companies involved in research, development, production, or distribution of products or services related to health care and life sciences. PRHSX may invest in companies of any size but focuses on investing in large and mid-cap companies.

This Sector – Health product has a history of positive total returns for over 10 years. Specifically, the fund has returned 10% over the three-year and 14.6% over the five-year benchmarks. Also, the fund has returned 13.2% over the past year. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here. 

The T. Rowe Price Health Sciences fund, managed by T. Rowe Price, has a Zacks Mutual Fund Rank #2 and carries an expense ratio of 0.77%.  Moreover, PRHSX requires a minimal initial investment of $2,500.

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