The Exchange-Traded Fund (ETF) concept has somewhat diminished the feasibility of mutual funds.
Why the shift to ETFs from mutual funds? ETFs are lower-cost vehicles and can be traded at any time, while mutual funds have higher costs and can only be traded at discreet periods.
Despite the allure of ETFs, mutual funds retain distinct features, such as an emphasis on active management and automatic investing. Moreover, mutual fund prices are determined by their net asset value (NAV), whereas the market determines ETF prices.
Considering the above, it can be said that mutual funds and ETFs have suitability differentiators. If you think mutual funds suit your needs, then here are three best-in-class funds to consider this summer.
Fidelity Contrafund (FCNTX)
The Fidelity Contrafund (MUTF:FCNTX) invests in a mix of growth and value stocks, which its portfolio manager, Will Danoff, believes are undervalued.
Among the fund’s key constituents are NVIDIA (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), and Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). Although it invests in household names, FCNTX has more than 370 names in its portfolio, meaning it is a diversified vehicle with stylized exposure. Moreover, the Fidelity Contrafund rebalances its portfolio according to general market conditions and the economic climate, which conveys its active management approach.
My rationale for adding FCNTX to this list stems from its active management. Global economic factors are highly volatile, enabling value-additivity from active fund managers. In addition, the fund has a solid track record, returning 14.93% per year in the past ten years. Lastly, although actively managed, FCNTX has a moderate expense ratio of 0.39%, which I find highly compelling.
There is no such thing as a perfect asset, but the Fidelity Contrafund ranks close to it.
Fidelity Intermediate Municipal Income Fund (FLTMX)
Key factors suggest that it might be a good time to test the waters in the municipal bonds space. For example, the term premium is nearing breakeven amid a substantial rise in the past year. Additionally, interest rates remain elevated, providing income-seeking investors with an opportunity to lock in alluring yields.
My analysis of the fundamental climate led me to Fidelity Intermediate Municipal Income Fund (MUTF:FLTMX). The fund has a duration of 4.89 years, suggesting it has moderate interest rate sensitivity. Moreover, Fidelity Intermediate Municipal Income Fund has a weighted 30-day yield of 3.34%, showing its potential as an income-based vehicle. In essence, I think the Fidelity Intermediate Municipal Income Fund return profile is well-balanced.
Lastly, considering the illiquidity of certain municipal bonds, the Fidelity Intermediate Municipal Income Fund’s expense ratio of 0.36% is solid. As such, the fund’s net return profile is desirable, lending me the opportunity to be optimistic about FLTMX’s prospects.
PIMCO Government Money Market Fund (AMAXX)
Although the U.S. yield curve and inflation have dropped in recent months, interest rates remain elevated. So, why not consider a money market fund? At worst, you’ll likely earn solid interest and have limited price risk exposure.
I like the look of PIMCO’s Government Money Market Fund (MUTF:AMAXX), which invests in money market instruments and short-term treasuries. AMAXX is perfect for those seeking price stability and income, as it is a low-duration asset with an NAV-based distribution yield of 5.17%. Moreover, the PIMCO Government Money Market Fund has a gross expense ratio of 0.34%, which I deem moderate for an actively managed fund.
As previously mentioned, lower implied interest rates pose a risk to AMAXX’s investors. However, I can’t see the interest rate cycle bottoming within the next few years. Moreover, bond market volatility is a growing concern among many analysts, including myself. Thus, I’m a firm believer in AMAXX’s intermediate prospects.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
