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5 Mutual Funds to Buy on Best Job Growth in 4 Months

The U.S. economy experienced strong job creation in June, registering the second highest payroll addition this year. This indicates that more people are re-entering workforce, and raises optimism over the labor market. Despite a weaker-than-expected rise in average hourly wages, investors focused on stupendous job growth. An encouraging jobs report hinted at a rosier economy and strengthened the prospect of at least one more rate hike in 2017.

Health care, social assistance, financial activities and mining companies led the way for job creation. In this context, we have focused on mutual funds with significant exposure to these sectors. But before that, let’s take a peek into the data.

Nonfarm Payrolls Post Gains in June

According to the U.S. Bureau of Labor Statistics, domestic non-farm payrolls increased by 222,000 last month, registering its best job growth in the last four months. This was also significantly higher than the consensus estimate of 174,000 job addition. Further, the economy added 47,000 more jobs in the April-May period than previously reported.

Meanwhile, the unemployment rate advanced from a 16-year low of 4.3% in May to 4.4% in June. While the unemployment rate increased last month, U-6 rate, a key unemployment rate which includes those working part time purely for economic reasons, rose from 8.4% in May to 8.6% in June. This was mainly because people who previously stopped searching for work due to a tough job market have decided to rejoin the labor force.

However, wage growth continued to lag expectations. Average hourly earnings rose by 4 cents in June to $26.25, up 2.5% year-over-year. Despite increasing 0.2% last month, average hourly wages were lower than the consensus estimate of a rise of 0.3%.

Sectors That Led Job Gains


Healthcare employment rose by 37,000 last month. An average of around 32,000 jobs were created in this sector during the first six months of this year. Ambulatory health care services contributed more than 26,000 jobs to the sector.Further, the broader Health Care Select Sector SPDR (XLV) increased 14.7% so far this year.

Social Assistance

Employment in this particular sector grew by 23,000. Jobs in child care and family care services rose 8,000 and 12,000, respectively. In the last one year, the sector created around 115,000 jobs.

Financial Activities

New job in financial activities surged by 17,000 last month. Employment in securities, commodity contracts and investments contributed to around 5,000 jobs. In the past one year, the sector added 169,000 jobs.Moreover, the broader Financials Select Sector SPDR (XLF) rose 7.6% so far this year.


Employment in the mining sector advanced by 8,000. Jobs in support activities for mining increased by 7,000. Following a sluggish job performance in October 2016, the mining sector created 56,000 jobs between that month and the last reporting period.

Buy These 5 Sectoral Mutual Funds

Here we have selected mutual funds from the four sectors which contributed to last month’s strong job gains. All the five mutual funds have a Zacks Mutual Fund Rank #1 (Strong Buy).These funds have encouraging year-to-date (YTD) returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio.

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.

Hartford Healthcare HLS Fund IA HIAHX invests the lion’s share of its assets in equity securities of companies engaged in the health care industry. These companies are located in different nations including the United States. HIAHX may invest in securities issued by companies of any market capitalization. The fund seeks appreciation of capital for the long run.

The fund has YTD return of 22.4%, and an expense ratio of 0.89% as compared with the category average of 1.36%.

Fidelity Select Health Care FSPHX invests a large portion of its assets in securities of companies mainly involved in the design, manufacture and sale of products or services used for healthcare or medicine. FSPHX invests in both U.S. and non-U.S. companies. The fund seeks growth of capital.

The fund has YTD return of 21.6%, and an expense ratio of 0.73% as compared with the category average of 1.36%.

ALPS|Red Rocks Listed Private Equity A LPEFX seeks maximization of total return. LPEFX invests heavily in securities of domestic and foreign companies, including those from the emerging markets. The fund also invests in derivatives, which have the economic characteristics of Listed Private Equity Companies.

The fund has YTD return of 19.1%, and an expense ratio of 1.47% as compared with the category average of 1.50%.

Fidelity Select Consumer Finance Portfolio FSVLX seeks appreciation of capital. FSVLX invests more than 80% of its assets in equity securities of companies involved in offering services related to consumer finance. The fund considers financial strength and economic conditions before investing in a company.

The fund has YTD return of 6.1%, and an expense ratio of 0.93% as compared with the category average of 1.39%.

Vanguard Precious Metals and Mining VGPMX seeks growth of capital over the long term. The fund invests the majority of its assets in the stocks of both domestic and foreign companies whose primary operations are regarding precious metals including gold. A maximum of 20% of its assets may be utilized to hold gold, silver or other precious metal in the form of bullion or coins.

The fund has YTD return of 4%, and an expense ratio of 0.43% as compared with the category average of 1.27%.

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