3 High-Quality Funds To Ride Out The Coronavirus Pandemic

The novel coronavirus has dragged financial markets down for the last few months, drying up resources for both individuals and businesses. Investors e refrained from the markets too as they triggered a sharp sell-off amid the virus outbreak.

However, in the current situation, mutual fund investors must remember that this is a temporary phase that shall pass in no time at all. This is why, instead of staying away from the markets, one could invest in quality funds as the weakness in broader markets offers a buying opportunity.

Global Lockdown is Controlling Pandemic

The novel coronavirus, which broke out in China about three months ago affected more than half a million lives around the globe as of Mar 27. Fears over the virus’ fast-spreading nature compelled many countries to quarantine entire cities, towns and localities. Governments worldwide hope that this blanket lockdown and social distancing measures may infect less people, thus breaking the cycle of contagion.

After all, despite their best efforts, top biotechnology firms haven’t zeroed on a cure yet. Firms such as Moderna, Inc. came up with an experimental vaccine but its results will take at least two months to be confirmed, as Bloomberg reported. Given that a cure isn’t exactly close, the best move for governments is to ensure that quarantine measures are followed strictly.

Social distancing measures in fact, proved their effectiveness in China and South Korea, which are witnessing a decline in the number of COVID-19 cases as days pass. Per a The New York Times report, both these countries appear to have brought the situation under control as daily life slowly returns to normalcy. Now that the United States and numerous other countries are following the same measures, this blip induced by the flu-like disease could be over soon.

Present Monetary and Fiscal Ease to Boost Markets

In addition, several monetary and fiscal stimuli injected into the economy are set to make the markets turn around soon. The Federal Reserve’s two consecutive rate cuts this year, which sent the benchmark rates to a 0-0.25% band, are set to drive economic activities. After all, near-zero interest rates will make borrowing cash easier for both consumers and businesses that have been suffering because of the disease.

Finally, earlier this week, the Senate approved a historic $2-trillion rescue package to pep up the economy in months ahead. The bill consists of $250 billion to be paid to individuals and families; $350 billion to be given in small business loans; $250 billion allotted to unemployment insurance benefits and a sum of $500 billion in loans for distressed businesses.

These measures could elevate consumer spending post the conclusion of the lockdown period and thus get the economy going again. In such a scenario, mutual fund investors could consider investing in funds that invest in high-quality, large-capitalization companies with better performance record than the broader markets in the past.

3 Best Funds to Buy

We have, therefore, selected three mutual funds that invest in such companies. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform 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.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Semiconductors Portfolio FSELX aims for capital appreciation. The fund invests the majority of its assets in securities of companies that manufacture semiconductors are related equipment. The non-diversified fund mostly invests in common stocks of companies. The fund invests in both U.S. and non-U.S. issuers. Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC) and NVIDIA (NASDAQ:NVDA) are among the top holdings of the fund.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSELX has an annual expense ratio of 0.73%, which is below the category average of 1.29%. It has returned 26.1% over a year. The fund has no minimum initial investment.

Fidelity Select Software & IT Services Portfolio FSCSX invests the majority of its assets in securities of companies that are engaged in research, design, production or distribution of products or services related to software or information-based services. The non-diversified fund aims for capital growth. Microsoft (NASDAQ:MSFT), Visa (NYSE:V) and Salesforce.com (NYSE:CRM) are among the top holdings of the fund.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCSX has an annual expense ratio of 0.72%, which is below the category average of 1.29%. It has returned 21.3% over a year. The fund has no minimum initial investment.

Red Oak Technology Select Fund ROGSX seeks long-term capital growth. The fund invests the majority of its assets in equity securities of companies operating in the technology sector. The fund mostly invests in common stocks of U.S. companies. Microsoft, Apple (NASDAQ:AAPL) and Intel are among the top holdings of the fund.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

ROGSX has an annual expense ratio of 0.95%, which is below the category average of 1.29%. It has returned 7% over a year. The fund has a minimum initial investment of $2000.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.

Get it free >>