S&P 500 Hit Record High: 4 Growth Mutual Funds To Buy

Better-than-expected jobs report cheered up the key U.S. indexes. After May’s lackluster jobs report, markets remained concerned over June’s job data. However, a surprise jump in job additions last month had a positive impact on investor sentiment and all the key U.S. indexes reached at their record high levels on July 11.

Following this market rally, the addition of growth mutual funds to one’s portfolio might prove to be one of the most suitable investment options. Risk taking investors, who give precedence to capital appreciation over dividend payout, may consider growth mutual funds for healthy returns.

Luster Jobs Report

According to the Bureau of Labor Statistics (BLS), the U.S. economy created a total of 287,000 jobs in June, significantly higher than the consensus estimate of 177,000. The economy added higher-than-expected new jobs for the first time in last four months. The tally was also considerably higher than May’s downwardly revised job number of only 11,000.

Moreover, the unemployment rate was 4.9% in June, which was higher than the consensus estimate of 4.8% and May’s rate of 4.7%. This was mainly because more than 400,000 Americans re-joined the workforce and the labor force participation rate rose to 62.7%.

Further, average hourly earnings gained 0.1% or 2 cents from May to $25.61 per hour in June. Although, this was lower than the consensus estimate of 0.2% and May’s 0.2% increase, year-ago gains advanced 2.6%.

Moreover, the Institute for Supply Management reported that ISM Services Index advanced from 52.9% in May to 56.5% in June, marking the best rise in the last seven months. Also, the reading was more than the consensus estimate of 53.3%.

Additionally, a report from Automatic Data Processing, Inc. (NASDAQ:ADP) revealed that private sector employers added 172,000 jobs in June, which was higher than May’s revised figure of 168,000.

S&P 500 at Its Best

Each of the three key U.S. indexes reached their respective record highs on July 11. The S&P 500 closed at its highest level ever at 2,143.19, beating its previous record settlement of 2,130.82 on May 21, 2015. The S&P 500 also registered record intra-day highs of 2,143.19.

Also, the Dow and the Nasdaq also rose to their highest levels this year. Also, the blue-chip index closed near the record level of 18,312.39 reached on May 19, 2015 and the tech-based index finished near the level of 5,000.

Buy These 4 Growth Mutual Funds

Growth funds focus on realizing an appreciable amount of capital growth by investing in stocks of firms whose value is projected to rise over the long term. However, a relatively higher tolerance to risk and the willingness to park funds for the longer term are necessary when investing in these securities. This is because they may experience relatively more fluctuations than the other fund classes.

Here, we have chosen growth mutual funds on the basis of large-cap, mid-cap and small-cap funds. Large-cap funds are an ideal investment option for investors looking for a high-return potential that comes with lower risk than small-cap and mid-cap funds. While, mid-cap funds are suitable for investors looking for high return that comes with lower risk than their small-cap counterparts. Further, small-cap funds tend to offer stronger growth potential compared to large- and mid-cap counter parts.

We have selected four growth mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) and percentage of net assets invested in common stocks of greater than 90%. Moreover, these funds have encouraging year-to-date, three-year and five-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.

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.

Loomis Sayles Growth A LGRRX seeks long-term growth of capital. The fund invests primarily in equity securities. Loomis Sayles Growth A has year-to-date, three-year and five-year annualized returns of 4.1%, 14.7% and 13.6%, respectively. LGRRX has an expense ratio of 0.92% as compared to the category average of 1.17%.

Commerce Growth CFGRX invests principally in stocks of companies that show above-average growth in earnings. The fund seeks appreciation of capital. Commerce Growth has year-to-date, three-year and five-year annualized returns of 7.8%, 14.6% and 12.3%, respectively. CFGRX has an expense ratio of 1.04% as compared to the category average of 1.17%.

T. Rowe Price Mid-Cap Growth RPMGX invests a major portion of its assets in a diversified portfolio of securities of mid-cap companies whose earnings are expected to increase at a higher rate than the average company. T. Rowe Price Mid-Cap Growth has year-to-date, three-year and five-year annualized returns of 3.9%, 13.2% and 12%, respectively. RPMGX has an expense ratio of 0.77% as compared to the category average of 1.28% .

Brown Advisory Small-Cap Growth Investor BIASX seeks to achieve capital appreciation by primarily investing in equity securities of small domestic growth companies. Brown Advisory Small-Cap Growth Investor has year-to-date, three-year and five-year annualized returns of 4.9%, 10.3% and 10%, respectively. BIASX has an expense ratio of 1.14% as compared to the category average of 1.31%.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.