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Is Parnassus Mid-Cap Fund (PARMX) a Strong Mutual Fund Pick Right Now?

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Any investors hoping to find a Mid Cap Growth fund might consider looking past Parnassus Mid-Cap Fund (PARMX). PARMX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes PARMX as Mid Cap Growth, a segment packed with options. Mid Cap Growth mutual funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers. A firm is typically considered to be a growth stock if it consistently posts impressive sales and/or earnings growth.

History of Fund/Manager

Parnassus is based in San Francisco, CA, and is the manager of PARMX. Parnassus Mid-Cap Fund debuted in April of 2005. Since then, PARMX has accumulated assets of about $1.98 billion, according to the most recently available information. The fund's current manager, Matthew D. Gershuny, has been in charge of the fund since October of 2008.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 8.3%, and is in the bottom third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 10.27%, which places it in the bottom third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of PARMX over the past three years is 8.9% compared to the category average of 10.39%. Over the past 5 years, the standard deviation of the fund is 9.36% compared to the category average of 10.43%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In the most recent bear market, PARMX lost 45.12% and outperformed its peer group by 6.23%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PARMX has a 5-year beta of 0.82, which means it is likely to be less volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. PARMX's 5-year performance has produced a negative alpha of -0.73, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PARMX is a no load fund. It has an expense ratio of 0.99% compared to the category average of 1.21%. So, PARMX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.

Bottom Line

Overall, Parnassus Mid-Cap Fund ( PARMX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

Don't stop here for your research on Mid Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare PARMX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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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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