5 Top Mutual Funds That Gained Over 20% YTD

Major U.S. market indexes pulled off an impressive year-to-date show, boosted by a string of factors such as solid economic data and a dovish Fed.

Therefore, it would be prudent to pick mutual funds which invest in sectors that gained the most during this period.

Sectors That Stood Out

The broader S&P 500 index gained 15.9% on a year-to-date basis, thanks to considerable growth in sectors such as real estate, technology, utilities, consumer discretionary, consumer staples and communication services.

Factors such as rise in new job additions and wage growth worked in favor of the sectors. According to the latest jobs data by the Labor department, nonfarm payrolls rose by 164,000 in July while unemployment rate remained at 3.7%. Coming to specific sectors, real estate has witnessed stellar growth so far this year, with better-than-expected existing home sales data in July and new home sales hitting a 12-year high in June on a seasonally-adjusted annualized basis.

Second, the technology sector witnessed the most consistent growth over a long period and not just on a year-to-date basis. The sector has grown as much as 96.1% over the past five years, outperforming the other 10 sectors of the S&P 500.

Growth in areas such as AI, machine learning and big data boosted the sector. The sector is the second top performer since January despite headwinds such as the U.S.-China trade war and global growth slowdown.

Third, increased new job additions helped the consumer discretionary sector record gains. A rise in shopping, dining-out, ordering food online and other discretionary activities boosted the sector’s performance.

Finally, defensive players like utilities, consumer staples and communication services gained because of trade war-induced fear among investors. The Fed’s recent rate cut that pushed benchmark interest rates to the range of 2-2.25% also boosted these sectors. In fact, sectors such as utilities could post further gains ahead since it’s now easier for large utility companies to engage in business expansion and other similar activities, thanks to lower rates.

Our Choices

We have, thus, selected five mutual funds that offer encouraging year-to-date returns of more than 20%. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). Additionally, the minimum initial investment is less than $5000. We expect these funds to outperform their peers in the future.

Now we come to the most vital question: 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: Zacks Investment Research

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Written By: Zacks Investment Research