The choice of which mutual fund to invest in is determined by
several parameters. These include the assets under management, the
manner in which these assets are allocated and the profile of the
fund manager. The fund manager's profile reveals much about how the
fund could be managed, since past track record reflects the
probable management style. Moreover, the price at which one buys
mutual fund is crucial too.
Mutual Funds as Alternative Investment
Apart from investing in stock markets, mutual funds are great
options for alternative investment purposes. One of the benefits of
mutual funds is that they allows a small investor to invest in a
basket of securities at one go. They are also less risky than any
individual asset class as underperformance of a security gets
mitigated by outperformance of others in the portfolio.
Benchmark Performances in 2014
Except for January, key indices have enjoyed a bull run so far.
After the record run in 2013; wherein the benchmarks kept hitting
record highs on several instances, markets started this year on a
very dismal note. Emerging market concerns, China's dismal economic
data and finally the Federal Reserve's $10 billion cut to the
economic stimulus dealt severe blows to the markets. In January,
the blue-chip index plunged 5.3%, S&P 500 was down 3.6% and
Nasdaq declined 1.7%. This was the blue-chip index' worst start
However, things turned remarkably well soon after and benchmarks
ended higher in February. The Dow Jones jumped 4% in February while
S&P 500 and Nasdaq scored gains of 4.3% and 5%, respectively.
It was Nasdaq's biggest monthly gain since September 2013. Since
end of January, the Dow, S&P 500 and Nasdaq have gained 5.9%,
6.6% and 5.7%, respectively.
However, volatility cannot be ruled out in near future given the
various macroeconomic factors. On the domestic front, the Federal
Reserve has decided to stick to its stimulus cut. Starting April,
the bond buyback plan will be $55 billion. Separately, the standoff
between Russia and western nations over the annexation of Crimea is
a lingering issue of late. There have been several sanctions
imposed on Russian officials, but Russia's President Vladimir Putin
seems undeterred by any warnings. (read:
Russia Mutual Funds to Watch on Ukraine Crisis
The Impact on Mutual Funds
The bullish market sentiment has already made NAVs of most of the
equity funds high, but the expectation of further move higher is
there given the positive market forecasts. So investing in certain
funds that are not equity focused and still look cheap will be a
prudent move at this point.
As said earlier, pricing is definitely important for picking funds.
Mutual fund unit price is a reflection of the value of the fund
holdings, adjusted for fees and expenses. Further, one of the most
important parameters used while selecting a fund is the expense
ratio. This parameter is calculated by dividing operating expenses
by the assets under management. These expenses include operating
and administrative costs and 12 b-1 fees. The largest portion of
these expenses is attributable to the fees paid to the fund
managers or investment advisors.
3 Cheap Fund Picks
Let's take a look here at some cheap mutual funds that have no load
(a charge levied on initial purchases of shares used to pay a
commission to the selling broker) low expense ratio, high returns
and sport a
Zacks Mutual Fund Rank #1(Strong Buy)
T. Rowe Price Spectrum Income (RPSIX)
invests in a range of T. Rowe Price mutual funds that represent
particular market segments. It invests in funds that have high
quality bond funds and also in income-focused stock fund among
others. The fund may chose to offload positions for restricting
losses, reinvest assets or secure gains.
The fund has an annual expense ratio of 0% as compared to category
average of 1.10%. The fund has a five-year annualized return of
10.09% and has returned 1.85% year to date.
SEI Market Growth Strategy Allocation A (SGOAX)
seeks capital growth as well as income. It invests in SEI funds
that are part of the non-Underlying Muni Bond Fund component of the
GoalLink Strategy. Each of these funds have their own investment
target. The SEI funds invest in securities and other asset classes.
The fund has an annual expense ratio of 0.11% as compared to
category average of 0.89%. The fund has a five-year annualized
return of 19.49% and has returned 0.54% year to date.
T. Rowe Price Spectrum Growth (PRSGX)
seeks capital growth over the long term. The fund invests in a
diverse range of mutual funds from T. Rowe Price. Each of these
funds represents a specific market segment. The fund invests in
various equity funds to gain broad exposure; thereby limiting
impacts from any particular market that may be underperforming.
The fund has an annual expense ratio of 0.0% as compared to
category average of 1.22%. The fund has a five-year annualized
return of 20.79% and has returned 0.13% year to date.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find
funds that not only outpaced the market in the past but are also
expected to outperform going forward.
Learn more about the Zacks Mutual Fund Rank.
View All Zacks #1 Ranked Mutual Funds
Get Your Free (PRSGX): Fund Analysis Report
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