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Which Financial Mutual Fund to Buy: FSRBX or PRISX?

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Nitish Marwah
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Mutual fund investors who seek impressive returns could consider the financial sector. Mutual funds are a great way to invest in a diversified pool of assets, which also offer an option to secure investments against inflation, market risks and high transaction costs. In addition, investing in the financial sector comes with its own benefits.  

First, investors can expect transparency because companies in the financial sector are extremely regulated and closely monitored. This careful monitoring offers investors the potential for solid returns over time. The Financial Select Sector SPDR Fund (XLF) has gained 24.8% on a year-to-date basis.

Thus, investing in financial mutual funds seems prudent as of now. However, choosing the right mutual funds for your portfolio can become cumbersome. To that end, let us find out which of the two funds discussed below is better.

T. Rowe Price Financial Services Fund PRISX

This fund seeks both capital growth and current income. The majority of its assets are invested in financial services companies. It may also purchase securities of companies involved in providing financial software. The fund uses fundamental bottom-up analysis in order to select securities.

PRISX was incepted in September 1996 and is managed by T. Rowe Price. The fund carries a Zacks Mutual Fund Rank #1 (Strong Buy) and has an annual expense ratio of 0.87%, which is below the category average of 1.41%. It has a minimum initial investment of $2,500.

This Zacks Sector-Finance product has a history of positive total returns for over a decade. Specifically, the fund’s returns are 15.1% over the 3-year and 9.7% over the 5-year period. To see how this fund performed compared with its category, and other #1 and #2 (Buy) Ranked Mutual Funds, please click here.  

The T. Rowe Price Financial Services Fund, as of the last filing, allocates its assets in the top two major groups; Large Value and Large Growth. Further, as of the last filing, Citigroup Inc and Chubb Corp are the top holdings in PRISX.

Fidelity Select Banking Portfolio FSRBX

This fund seeks appreciation of capital. FSRBX normally invests at least 80% of its assets in common stocks of companies principally involved in banking. The fund invests in both U.S. and non-U.S. companies.

FSRBX was incepted in June 1986 and is managed by Fidelity. The fund carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.77%, which is below the category average of 1.41%. It has no minimum initial investment.

This Zacks Sector-Finance product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 12.2% over the 3-year and 8.5% over the 5-year period. To see how this fund performed compared with its category, and other #1 and #2 Ranked Mutual Funds, please click here.  

The Fidelity Select Banking Portfolio fund, as of the last filing, allocates its assets in the top two major groups; Large Value and Small Value. Further, as of the last filing, Bank of America Corp and Wells Fargo & Company were the top holdings in FSRBX.

To Conclude

While both FSRBX and PRISX are buy-rated funds, upon having a closer look, we find that the former is a clear winner. FSRBX is dirt cheap as it has no minimum initial investment compared with PRISX’s $2,500. Also, its administrative and other operating expenses are slightly lower than PRISX.

However, FSRBX offers higher risk and risk-adjusted returns compared with PRISX (FSRBX has a 3-year beta of 1.46 compared with PRISX’s 0.98). Nevertheless, one should clearly bet on FSRBX for higher returns on low investments.

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