Markets

5 Best Performing Growth Mutual Funds in 2017

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Stocks in the United States kept breaking boundaries in 2017 to register one of the biggest bullish runs in the recent past. Such stellar performances were driven primarily by a slew of strong corporate earnings, hopes of an overhaul of the U.S. tax code and more than 3% growth that the economy achieved for two consecutive quarters last year.

Mutual funds also performed exceedingly well last year with large-cap and growth funds leading the gains. These gains were primarily from technology, which turned out to be one of the best performing sectors in 2017. Taking such factors into consideration let's take a look at five of the best performing mutual funds of 2017.

Growth Funds Overshadow Value Funds

It was also a great year for growth-oriented funds. Such funds topped their value counterparts regardless of market valuations. More exposure to tech holdings bolstered gains for growth funds. The technology funds increased an impressive 40% last year. Needless to say, such gains were driven by strong performances by some of the tech giants such as Apple, Amazon and Facebook, each gaining more than 50% in 2017.

Further, the large-cap funds outshone the small caps. Among the nine Morningstar Style Box categories, the large-growth funds gained 28%, marking the highest average gains, while the small-value funds could garner a paltry 9% i.e. the lowest average gain. This can also be due to strong earnings from big names in the tech world. This also reminds one of the bull-run the markets experienced back in the 1990s, when tech stocks were hot, making value-based stocks lack luster.

What Drove the Gains?

Markets kept gaining traction by a slew of marvelous corporate earnings and optimism around President Trump's tax reforms. A strengthening economy and better job prospects provided a significant boost to the markets. Additionally, the earnings scenario was quite strong in the first three quarters of 2017, with fourth quarter earnings expected to be up 8.6%. Moreover, the Tax Cuts and Jobs Act of 2017 lowered the corporate tax rate to 21% from 35%. Also, the Federal Reserve finally increased its benchmark interest rate by a quarter percentage point. This marked the third rate hike by the Fed in 2017.

U.S. GDP expanded at 3.3% in the third quarter of 2017, marking the fastest pace of growth since the third quarter of 2014. The economy achieved such a feat for the second consecutive quarter. Per a report by the Commerce Department, consumer spending advanced 2.3% in 3Q17. However, the biggest boost to the economy came from spending on business equipment, which shot up 10.4% in the period, the highest in three years.

Further, consumer confidence increased from an upwardly revised level of 126.2 to 129.5, exceeding the estimated mark of 123.9. This is the highest since the reading of 132.6 recorded in November 2000. It also improved on last month's initial reading of 125.9, which was, at the time, the highest in 17 years.

5 Best Performing Mutual Funds In 2017

We have, thus, selected five mutual funds from the aforesaid categories that boast a Zacks Mutual Fund Rank #1 (Strong Buy) and have offered the best returns in 2017. They also offer a minimum initial investment within $5,000 and carry a low expense ratio. Investors can click here to see the complete list of Zacks #1 Rank Mutual Funds , their Zacks Rank and past performance.

Investors mostly rely on mutual funds as the backbone of their investment strategy. And why not? Reduced transaction costs and diversification of portfolios without several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money ).

JPMorgan Small Cap Growth APGSGX invests a large portion of its assets in securities of small-capitalization companies. PGSGX seeks long-term capital growth primarily from a portfolio of equity securities of small-capitalization and emerging growth companies.

PGSGX's has one and three-year annualized returns of 42.5% and 14.7%, respectively. Annual expense ratio of 1.24% is lower than the category average of 1.36%. PGSGX's performance when compared to funds in its category, as of the last filing, was in the top 1% in the past one year.

JPMorgan Dynamic Small Cap Growth Fund A VSCOX seeks long-term growth of capital. VSCOX invests the lion's share of its assets in equity securities of primarily small-cap companies. The fund normally invests in those companies that have a Russell 2000 Growth Index and market cap of under $4 billion.

VSCOX has one and three-year annualized returns of 42.9% and 14.8%, respectively. Annual expense ratio of 1.25% is lower than the category average of 1.27%. VSCOX's performance when compared to funds in its category, as of the last filing, was in the top 1% in the past one year.

Franklin DynaTech A FKDNX seeks growth of capital over the long run. FKDNX invests mostly in companies that are expected to be leaders in innovation, have superior management, can reap the benefit of new technologies and have an advantage from new industry situations in the dynamically fluctuating global economy.

FKDNX has one and three-year annualized returns of 41.3% and 15.8%, respectively. Annual expense ratio of 0.90% is lower than the category average of 1.11%. FKDNX's performance when compared to funds in its category, as of the last filing, was in the middle third in the past one year.

T. Rowe Price Instl Large Cap GrowthTRLGX seeks appreciation of capital in the long run by investing in the common stocks of growth companies. The fund normally invests at least 80% of net assets in the common stocks of large companies that have a capitalization similar to companies included on the Russell 1000 Growth Index.

TRLGX has one and three-year annualized returns of 39.7% and 16.5%, respectively. Annual expense ratio of 0.56% is lower than the category average of 1.11%. TRLGX's performance when compared to funds in its category, as of the last filing, was in the top 1% in the past one year.

Fidelity OTCFOCPX seeks appreciation of capital in the long run. The fund invests the lion's share of assets in common stocks and securities of companies traded on NASDAQ or an over-the-counter (OTC) market, having more small and medium-sized companies than other markets. It invests around one-fourth of its total assets in the technology sector. The fund invests both in U.S.-based and non-U.S. based stocks.

FOCPX has one and three-year annualized returns of 40.7% and 17.3%, respectively. Annual expense ratio of 0.81% is lower than the category average of 1.11%. FOCPX's performance when compared to funds in its category, as of the last filing, was in the top 1% in the past one year.

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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.


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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