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4 Top Funds to Buy on Fed's Quarter Point Rate Cut

The Federal Reserve cut its benchmark rates by an expected quarter-point on Oct 30. The central bank’s dovish stance was a result of lingering trade-related concerns, uncertainty over the signing of a partial deal between the United States and China in November, low inflation, and a slowing global economy.

Despite the disappointing factors behind Fed’s decision, the move comes as a boon to some of the sectors. In the current low-interest-rate scenario, sectors such as utility, telecommunications, real estate and precious metals are poised to gain the most. Mutual fund investors could thus consider investing in funds from these sectors.

Fed Cuts Rates for the Third Time in 2019

The central bank’s rate cuts were widely anticipated by market pundits and investors. After all, domestic economic data has been largely disappointing lately.

First, the U.S. manufacturing sector contracted in September, registering the lowest reading since June 2009. On top of that,new orders for manufactured durable goods declined 1.1% to $248.2 billion last month, per the U.S. Census Bureau.

Second, consumers are also losing confidence in the economy. This was reflected in the Conference Board’s Consumer Confidence Index, which declined in October for the third straight month to 125.9.

Following the Federal Open Market Committee’s two-day meeting that concluded on Oct 30, the Fed slashed rates by 25 basis points. The current Federal rates now hover in the range of 1.5% to 1.75%.

This year’s third rate cut was referred to as “midcycle adjustment” by Fed Chairman Jerome Powell. According to Powell’s statement, it’s quite clear that the central bank will rely more on incoming data for any adjustments in the benchmark rates ahead, instead of a continuing goal to adjust rates lower.

Sectors Well-Positioned for Investments

In the current low-interest environment, sectors such as utility, real estate, telecommunications and precious metals (gold) could be ideal for investment.

High-dividend yielding, capital-intensive sectors such as utility, real estate and telecommunications have vast infrastructure that need to be maintained, thus requiring considerable expenditure. A low-rate environment makes it easier for companies to borrow from financial institutions. This is likely to improve the companies’ efficiency and thus push their profit margins higher.

Second, investing in gold mutual funds could offer higher returns as well. Gold is considered a safe haven for investors who wish to hedge their savings in times of economic downturns. At present, Fed’s easing policy and increasing uncertainty on the trade front may drive gold’s demand higher.

Our Choices

We have, therefore, selected four mutual funds from the aforementioned sectors. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.

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.

American Century Global Gold Fund A Class ACGGX invests the majority of its assets in securities of companies that are engaged in activities such as mining, processing and distributing gold. The non-diversified fund aims for total return.

This Zacks sector – Precious product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

ACGGX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.92%, which is below the category average of 1.38%. It has returned 25.6% on a year-to-date basis. ACGGX has a minimum initial investment of $2500.

AllianzGI Global Water Fund Class A AWTAX aims for capital growth over long-term. The fund invests the majority of its assets in common stocks other equity securities of companies represented in one or more of the S&P Global Water Index, the NASDAQ OMX US Water, Global Water Indices or the S-Network Global Water Index. The non-diversified fund invests in any company that is engaged in considerable water-related activities.

This Zacks sector – Utilities product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

AWTAX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 1.22%, which is below the category average of 1.36%. It has returned 23.4% on a year-to-date basis. AWTAX has a minimum initial investment of $1000.

Cohen & Steers Global Realty Shares, Inc. Class A CSFAX fund aims for total return by investing in real estate equity securities worldwide. The fund invests the majority of its assets in common stocks and other equity securities of U.S. and foreign real estate companies. These investments include REIT and similar entities.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

CSFAX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 1.23%, which is below the category average of 1.28%. It has returned 22.1% on a year-to-date basis. CSFAX has no minimum initial investment.

Fidelity Select Telecommunications Portfolio FSTCX fund aims for capital appreciation. The fund invests the majority of its assets in developing, producing and distributing telecommunications services. FSTCX usually invests in common stocks.

This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSTCX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.84%, which is below the category average of 1.24%. It has returned 14.5% on a year-to-date basis. FSTCX has no minimum initial investment.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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