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5 Best-Performing Mutual Funds of First-Half 2017

All the key indexes witnessed significant milestones in the first half of this year, with both the Dow and S&P 500 registering their best growth since the same period in 2013. Additionally, a significant jump in tech stocks benefited the tech-laden index, Nasdaq, which posted its best first-half performance since 2009. 

Initially, optimism over President Donald Trump-led pro-growth economic policies boosted markets in the early part of this period. After expectations over Trump-led economic policies fizzled, investors gained confidence from economic data and earnings results in the latter part of the first half. Better corporate earnings and a record decline in the unemployment rate facilitated this growth.

Banking on such positive vibes, the addition of mutual funds to your portfolios having strong exposure to U.S. companies could prove lucrative. Now, let us take a look at some of the encouraging factors that contribute to gains in these mutual funds.

Benchmarks Post Record Gains

The Dow and S&P 500 each gained around 8% in the first half, their best gains since 2013. Further, the Nasdaq rose 14.1%, marking its best performance since 2009. All the five tech behemoths Facebook Inc FB, Apple Inc. AAPL, Amazon.com, Inc. AMZN, Netflix, Inc. NFLX and Alphabet Inc GOOGL or “FAANG” gained more than 16%, leading the Nasdaq to such a remarkable performance.

Positive sentiments over Trump’s economic policies including “massive” tax cuts, deregulation initiatives and surge in infrastructure spending propelled the indexes higher in the first part of the previous half. But markets managed to maintain their sheen even when Trump’s policies failed to gain passage in the Congress, on the back of a strong job market and solid corporate earnings.

Earnings Upbeat

The S&P 500 members registered Q1 earnings growth of 13.3% which was double the growth expected at the start of the last reporting cycle. The picture that emerged from the Q1 earnings season was one of notable improvement over other recent periods, with growth reaching the highest level in more than five years.

Further, total Q2 earnings for the S&P 500 index are expected to be up 5.9% from the same period last year on 4.6% higher revenues. The Energy, Aerospace, Finance, Technology, Construction and Industrial Products are expected to be big growth drivers in Q2. (Read More: Taking Stock of the Earnings Picture)

Consistent Job Gains Boost Stocks

According to Labor Department data, job additions averaged at 162,000 in the first five months of this year. The financial sector created 600,000 jobs since the 2007-08 financial crisis.The manufacturing sector also added 55,000 jobs from January to May, registering its best gains since the same period in 2014.

Most analysts and market watchers had expected significant job additions in May following the release of bullish ADP data. However, official data revealed that only 138,000 job additions had taken place last month, much lower than the consensus estimate of 184,000.

But there was a lot to digest beyond the 66,000 jobs lost due to downward revisions. Also, the unemployment rate declined from 4.4% to 4.3% in May, marking the lowest level since 2001.This also came in below the Fed’s projected level of 4.5%.

Meanwhile, ADP reported job additions of 158,000 for June, lower than the predicted level of 188,000. However, it also stated that job growth was between 150,000 and 200,000 in the last six months.

Buy These 5 Best Performing Mutual Funds

Here, we have selected five mutual funds that have significant exposure to the U.S. stock markets. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). 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.

These funds have encouraging three-month and year-to-date (YTD) returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio.

Fidelity Select Technology FSPTX seeks growth of capital by investing in common stocks. It normally invests a large portion of its assets in securities of companies principally engaged in offering and developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.

The fund has three-month and YTD returns of 8.6% and 27.2%, respectively, and an expense ratio of 0.76% as compared with the category average of 1.45%.

Fidelity Growth Discovery K FGDKX invests its assets heavily in common stocks of companies which are expected to have above average growth prospects. The fund seeks appreciation of capital. It invests not only in U.S. companies but also in non-U.S. entities.

The fund has three-month and YTD returns of 7% and 19.5%, respectively, and an expense ratio of 0.65% as compared with the category average of 1.16%.

Oppenheimer Global Opportunities Y OGIYX invests primarily in equity securities of companies throughout the globe including the U.S. The fund may also invest around one-fourth of its assets in debt securities which are rated below investment grade. It may also invest in mid- and small-cap companies.

The fund has three-month and YTD returns of 8.2% and 25.1%, respectively, and an expense ratio of 0.94% as compared with the category average of 1.50%.

Franklin DynaTech Fund Advisor FDYZX seeks capital appreciation for the long run. FDYZX invests the lion’s share of its assets in equity securities issued by companies which are believed to be leaders in innovation and benefit from new industry conditions.

The fund has three-month and YTD returns of 7.8% and 22.2%, respectively, and an expense ratio of 0.65% as compared with the category average of 1.16%.

Fidelity OTC K FOCKX invests a bulk of its assets in equity securities of companies, which are mainly traded on NASDAQ or the OTC market. As compared to the other markets, this OTC market includes more mid- and small-cap domestic and foreign companies. FOCKX seeks appreciation of capital.

The fund has three-month and YTD returns of 9.4% and 23.2%, respectively, and an expense ratio of 0.79% as compared with the category average of 1.16%.

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