The market and economic environments are shaping up to be ideal for mid-cap stocks and growth stocks, which makes now a great time to buy mid-cap growth mutual funds.
Year-to-date, mid-cap growth stock funds are up approximately 7%, whereas the S&P 500 is up around 2.4%. The reason why mid-cap stocks can be good now and in the near-term, as opposed to small-caps and large-caps, is that small-caps have more market risk and large-caps may get hit by a strong dollar.
While it is possible that small-caps can outperform larger capitalization stocks in 2015, they may also have steeper declines in an eventual bear market, which may be just around the corner. The strong dollar problem with some large-caps is that many of them have overseas operations and bringing back earnings from foreign currencies into a higher relative U.S. dollar gives corporate earnings a haircut.
Here are three mid-cap growth stock mutual funds to buy now:
Best Mid-Cap Growth Mutual Funds to Buy: Nicholas Fund (NICSX)
Although not a household name in the investment universe, one of the best mutual funds open to investors on the market today is the Nicholas Fund (MUTF:NICSX).
Aptly named after the lead fund manager and Nicholas Company Inc founder, Albert O. Nicholas, the Nicholas fund has an outstanding record of producing top-notch performance to investors, while remaining an accessible low-cost fund.
The 1-, 3- and 5-year returns for NICSX rank better than more than 95% of mid-cap growth category peers, while the 10- and 15-year ranks are both top quartile and top third, respectively.
The minimum initial investment is just $500 and the expense ratio is low for mid-cap funds at 0.73%, or $73 for each $10,000 invested.
Best Mid-Cap Growth Mutual Funds to Buy: Vanguard Mid-Cap Growth Index Fund Investor Shares (VMGIX)
If you want a pure dose of mid-cap growth stocks in a low-cost index fund, you can’t beat Vanguard Mid-Cap Growth Index Fund Investor Shares (MUTF:VMGIX).
VMGIX once targeted the MSCI US Mid Cap Growth Index but changed its benchmark to the CRSP US Mid Cap Index in April 2013. Time can only tell if this was a good long-term move, but the 2014 gain beat 95% of mid-cap growth funds and Vanguard is arguably the master of indexing.
The portfolio holds primarily the larger end of the mid-cap stock universe with an average market cap of 11.8 billion (the average category market cap is 9.8 billion).
In true Vanguard fashion, you’ll find it difficult to beat its cheap expense ratio of 0.23% among mid-cap stock funds. The minimum initial investment is $3,000.
Best Mid-Cap Growth Mutual Funds to Buy: Janus Enterprise Fund (JAENX)
Rounding out our list of outstanding mid-cap growth mutual funds, we have a well-managed low-cost fund in Janus Enterprise (MUTF:JAENX).
JAENX slipped in performance in the big 2013 rally compared to other mid-cap growth stock funds (although it still gained 31%). But it’s back in the saddle of top performance with a 2014 rank placing it ahead of 88% of category peers. The Enterprise fund is comfortably ahead of the average mid-cap growth fund year-to-date with a 7.6% jump.
You’ll get a good dose of mid-cap stocks in JAENX with an average market cap of 8.7 billion, compared to 9.8 billion for the category. You’ll also get a modest mix of non-U.S. stocks at around 10% of portfolio holdings.
The expense ratio of 0.92% is below average for the category and the minimum initial investment is reasonable at $2,500.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.
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