4 Financial Mutual Funds to Keep an Eye On

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Major U.S. indexes, like the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average, have given investors positive returns of 12.2%, 14.4% and 3.2%, respectively, in the year-to-date period. However, concerns remain due to the slowdown in the U.S. GDP growth rate amid a higher-than-acceptable Consumer Price Index (CPI) reading by the Federal Reserve. Prioritizing inflation will further delay interest rate reduction by the central bank.

The consumer price index (CPI), which is the most accepted gauge for inflation, was higher at 3.4% for the month of April against the Fed’s ambitious inflation target of 2%. The Producer Price Index for the month of April was recorded at 0.5%, which is above the consensus estimate of 0.3%, confirms inflation is still a concern for the economy. The U.S. GDP growth rate of 1.3% for first-quarter 2024 compared to 3.4% in fourth-quarter 2023 was the weakest since the spring of 2022.

Market participants expect the Fed to be less hawkish this year. The CME Fedwatch Tool currently assigned a 56% probability that the Fed will cut the benchmark lending rate by 25 basis points in November and a 77.5% chance that it will be reduced by 25 basis points in December. By keeping interest rates high for longer, the Fed intends to get rid of the sticky inflationand meet its ambitious inflation target.

Higher interest rates mostly benefit brokerages, commercial banks and regional banks. The period of higher interest rates serves as a good source of revenues for the banking and financial services industry. The banks can charge higher interest rates for loans and pay lower interest rates to depositors.

Thus, from an investment standpoint, we have selected four financial mutual funds that are expected to give a positive return amid the rise in inflation. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

These funds have impressive year-to-date (YTD), three-year and five-year returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio of less than 1%.

Fidelity Select Insurance Portfolio FSPCX fund invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in underwriting, reinsuring, selling, distributing, or placing of property and casualty, life, or health insurance. FSPCX advisors choose to invest in stocks based on fundamental analysis factors such as financial condition, industry position, as well as market and economic conditions.

Fahim Razzaque has been the lead manager of FSPCX since Jul 13, 2022. Most of the fund’s holdings were in companies like Marsh & Mclennan (10.5%), Chubb (9.8%) and The Travelers Companies (8.9%) as of Feb 29, 2024.

As of Apr 30, 2024, FSPCX’s YTD, three-year and five-year annualized returns are 9.8%, 13.5% and 13.7%, respectively. FSPCX has an annual expense ratio of 0.80%.

To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Brokerage & Investment FSLBX invests most of its net assets in securities of companies engaged in the exchange of financial instruments, stock brokerage, commodity brokerage, investment banking, tax-advantaged investment or investment sales, investment management, or related investment advisory and financial decision support services. FSLBX advisors invest in both domestic and foreign companies.

Nadim Rabaia has been the lead manager of FSLBX since Jun 14, 2023. Most of the fund’s holdings were in companies like Moody’s (7.9%), KKR (5.5%) and BlackRock (5.5%) as of Feb 29, 2024.

As of Apr 30, 2024, FSLBX’s YTD, three-year and five-year annualized returns were almost 3.3%, 8.6% and 16.1%, respectively. FSLBX has an annual expense ratio of 0.76%.

T. Rowe Price Financial Services Fund, Inc. PRISX seeks long-term capital growth by investing most of its net assets in companies engaged in the financial services industry. PRISX may also invest in companies having substantial revenues from business within the financial services sector.

Matt J. Snowling has been the lead manager of PRISX since Jun 30, 2021. Most of the fund’s holdings were in companies like Bank of America (5.4%), Wells Fargo (5%) and Chubb (4.4%) as of Dec 31, 2023.

As of Apr 30, 2024, PRISX’s YTD, three-year and five-year annualized returns were almost 8.4%, 6.6% and 12.4%, respectively. PRISX has an annual expense ratio of 0.83%.

Fidelity Select Financial Services Portfolio FIDSX invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in providing financial services to consumers and industry. FIDSX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer’s financial condition, industry position, as well as market and economic conditions.

Matt Reed has been the lead manager of FIDSX since May 31, 2019. Most of the fund’s holdings were in companies like Mastercard (10.2%), Wells Fargo (8.0%) and Bank of America (5.4%) as of Feb 29, 2024.

As of Apr 30, 2024, FIDSX’s YTD, three-year and five-year returns were 6.1%, 5.6% and 11.1%, respectively. FIDSX has an annual expense ratio is 0.76%.

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