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7 Best Mutual Funds to Buy for February

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As I write this, Groundhog Day isn’t for another week or so. However, the Federal Reserve certainly seemed to signal that business was business as usual. Bullish investors got the most dovish statement they could have asked for. This means that stocks should go up. So why write about mutual funds?

Well, for starters, inflation remains a concern. And the Fed won’t address interest rates until March at the earliest.

Which means we’re probably business as usual. And many investors are turning to risk-free assets. So if you have money to protect or are new to investing, now might be the time to consider mutual funds.

Mutual funds are generally considered lower risk, but you can always tailor your selections to your investment goals and risk profile. So, for the purposes of this article, here are a handful of mutual funds that fall into different categories.

  • Fidelity Select Semiconductor Portfolio (MUTF:FSELX)
  • Rowe Price Global Technology Fund (MUTF:PRGTX)
  • Vanguard Mid Cap Index Fund (MUTF:VIMAX)
  • Fidelity Mid Cap Index Fund (MUTF:FSMDX)
  • Fidelity Total Market Index Fund (MUTF:FSKAX)
  • Delaware Ivy S&P 500 Dividend Aristocrats Index Fund (MUTF:IDAX)
  • Brown Advisory Sustainable Growth Fund (MUTF:BIAWX)

We hope you find one or more that suits you. But if you can’t find any on this list, Statista reported that there were 7,636 mutual funds in the United States in 2020.

Top 7 Mutual Funds: Fidelity Select Semiconductors Portfolio (FSELX)

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Who says mutual funds have to provide pedestrian growth? One way to maximize the growth of a mutual fund is to invest in a sector fund. And few sectors were hotter than the semiconductor sector in 2021. Semiconductor chips are used in many products that drive the economy into the future: artificial intelligence, autonomous driving, the Internet objects (IoT) and much more.

Some analysts worry that semiconductor stocks have peaked. However, this view is contradicted by others who say the chip shortage could last until 2023 for some sectors of the economy.

With this in mind, the Fidelity Select Semiconductors portfolio is an excellent choice for gaining broad exposure to this sector. The fund’s 5-year return achieves an annualized return of 35.06% (including dividend growth) which exceeds both the industry average of 26.65% and the S&P 500 Index average of 18.47%.

You will pay a little more for the privilege. The FSELX fund has a total expense ratio of 0.7%, but if you’re looking for aggressive growth, the fund more than makes up for it.

T. Rowe Price Global Technology Fund (PRGTX)

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If you’re interested in aggressive growth, but want exposure to a wider variety of stocks, the T. Rowe Price Global Tech Fund may be a good choice. Despite the recent sell-off in tech stocks, the tech sector will be the perfect place for growth-oriented investors.

This fund offers investors exposure to a cross-section of the entire technology sector. In fact, more than 80% of the fund’s holdings are in the technology or communications sectors. The PRGTX fund counts Amazon (NASDAQ:AMZN) and You’re here (NASDAQ:TSLA) among its largest holdings as well as Focus on video communications (NASDAQ:ZM) and Roblox (NYSE:RBLX).

Unsurprisingly, the fund has been in steep decline since mid-November, but prior to that, the fund generated a 141% return over the past five years.

The total expense ratio is 0.86, but it offers a five-year average return of 28.1%, which is only slightly below the performance of the S&P 500 over the same period.

7 Best Mutual Funds: Vanguard Mid-Cap Index Fund (VIMAX)

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In times of volatility like this, a sensible strategy is to have a blue-chip stock base layered with mid-cap stocks to add growth. Mid-cap stocks are often among the fastest growing stocks because they themselves are still in the growth phase.

And a good way to get exposure to mid-cap stocks is through mutual funds like the Vanguard Mid-Cap Index Fund. The fund has over $154 billion in assets across 350 stocks. The most weighted sectors are technology (22%) and healthcare (>13%). However, the fund also offers exposure to cyclical consumer stocks such as Chipotle Mexican Grill (NYSE:GCM). And no share represents more than 0.78% of assets.

The five-year average return is 12.18%, but that includes the last market selloff. The VIMAX fund has an attractive expense ratio of just 0.05%. The fund requires a minimum investment of $3,000.

Fidelity Mid Cap Index Fund (FSMDX)

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Another option as a mid cap mutual fund is the Fidelity Index Fund Mid Cap. This fund invests in some of the best performing sectors in the market, including technology, industrials, financials and healthcare.

As an index fund, the FSMDX is designed to follow predefined rules that allow the fund to track a specific basket of underlying investments. In fact, 80% of the FSMDX fund’s $25.9 billion in assets are included in the Russell Midcap Index.

As of this writing, the top four sectors by weighting are technology, industrials, consumer discretionary and financials. The four main holdings of the fund are DexCom (NASDAQ:DXCM), CrowdStrike (NASDAQ:CRWD), IDEXX Laboratories (NASDAQ:IDXX) and Marvell Technology (NASDAQ:LMRV). And no holding represents more than 0.51% of the fund’s assets under management.

The fund has an expense ratio of 0.025% and no minimum investment requirement.

7 Best Mutual Funds: Fidelity Total Market Index Fund (FSKAX)

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I may upset a few mutual fund investors because I didn’t list a fund designed to minimize fees. After all, one of the main considerations before investing in a fund is to take into account the fee structure which can erode a fund’s total return.

It ends now. If you’re looking for an ultra-low-cost mutual fund, the Fidelity Total Market Index Fund is the one for you. The fund has an expense ratio of 0.015%, among the lowest you can find.

The FSKAX fund has over $77 billion in assets under management. More than 50% of the fund’s weighted holdings are in technology, financial services and healthcare. However, be aware that Big Tech, in particular, FAANG stocks account for four of the fund’s top five holdings. And Microsoft (NASDAQ:MSFT) represents the fifth. None of the stocks represents more than 4.49% of the fund’s assets. Yet these tend to be some of the most volatile in the tech sector.

Delaware Ivy S&P 500 Dividend Aristocrats Index Fund (IDAAX)

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I have to tip my InvestorPlace colleague Thomas Niel for guiding me towards this next fund. I wanted to present a quality fund for income-oriented investors. At present, the flight from growth to value continues. And for many investors, that means looking for stocks that pay dividends.

Niel recently wrote about the Delaware Ivy S&P 500 Dividend Aristocrats Index Fund. It directed investors to funds they could buy to protect themselves from rising interest rates. The first of these hikes won’t arrive until March at the earliest, but the IDAAX fund is still worth considering.

Dividend Aristocrats are a small group of stocks made up of companies that have increased their dividend for at least 25 consecutive years. Once a company becomes a member of this club, they are more likely to take steps to increase it in the future.

One feature I like about this fund is that, as Neil writes, “it holds every aristocrat equally in the portfolio, instead of weighing them by market cap.”

7 Best Mutual Funds: Brown Advisory Sustainable Growth Fund (BIAWX)

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The last mutual fund I mention can help investors who want to use their capital to support companies that perform well on environmental, social and governance (ESG) initiatives. It’s too early to tell if these companies will be able to achieve their goals, but for now, sustainability is a key consideration for many investors.

The Brown Advisory Sustainable Growth Fund is managed by Karina Funk and David Powell. The pair are looking for companies that use their ESG to generate competitive advantages that lead to lower costs and potentially increased value and sales.

With an average five-year return of over 26.58%, you can say it’s working. However, you should be aware that over 75% of the company’s assets (weighted by sector) are in technology, healthcare and consumer cyclical stocks. This may not be wide enough for some investors. But if sustainability is your primary driver, this is a good fund to consider.

As of the date of publication, Chris Markoch had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris Markoch is a freelance financial writer who has covered the market for eight years. He has been writing for InvestorPlace since 2019.

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