4 Best Performing Mutual Funds Of 2018

Despite a great start to 2018, the bull run in U.S. markets showed some slack towards the later part of the year. Having said that, for the most part of last year, the U.S. economy was healthy. However, broader geopolitical concerns and the trade war with China weighed on markets.

Meanwhile, better-than-expected economic data and healthy sectoral performance kept the markets afloat. Large-cap and healthcare stocks particularly performed well. Under such circumstances, adding large-cap and healthcare mutual funds to one’s portfolio seems prudent.

Large-Cap Growth and Healthcare Funds Led the Way

Historically, when markets turn jittery, large-cap growth stocks outperform small-caps as well as mid-cap ones. The reason behind a rally in large-cap growth stocks is that such stocks benefit immensely from strong earnings and expectations that they will perform well even if the economy slows down. The U.S. economy, by the way, is expected to slow down to an annualized growth rate of 2.3% this year from 3% in 2018.

Thus, large-cap growth funds not only had the best year-to-date returns in 2018 among nine Morningstar Style Box categories of funds, such funds are further poised to gain traction this year.

Healthcare funds, in the meantime, performed the best among sector funds. For the record, the Health Care Select Sector SPDR ETF (XLV) gained 2.5% between Jan 2 and Dec 31, 2018. Market uncertainties forced investors to invest in relatively stable sectors like healthcare.

4 Best Funds Of 2018

Given such circumstances, we have highlighted four mutual funds from the aforesaid winning areas carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this ...

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