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Home»Mutual Funds»3 Healthcare Funds to Play Safe as Consumer Sentiment Hits a Low
Mutual Funds

3 Healthcare Funds to Play Safe as Consumer Sentiment Hits a Low

By CharlotteSeptember 10, 20265 Mins Read
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Oil prices are climbing again as tensions between the United States and Iran intensified earlier this week. Although consumer sentiment improved slightly in the final days of August, it remains near historically weak levels amid persistent concerns about elevated inflation and growing uncertainty surrounding the conflict in the Middle East.

Investors are concerned that another jump in oil prices could push inflation higher, putting additional pressure on an economy that is already showing signs of slowing.

Against this backdrop, it would be wise to consider investing in defensive, low-risk funds such as healthcare. Three such funds are Vanguard Health Care Fund VGHCX, Janus Henderson Global Life Sciences D JNGLX and Fidelity Select Health Care FSPHX.

Consumer Sentiment Remains Weak

The University of Michigan’s final Consumer Sentiment Index reading for August came in at 51.7, slightly above the preliminary reading of 51 but well below July’s 55.2. The latest reading was also 11% lower than the level recorded a year earlier.

The survey found that pessimism remained widespread among older consumers as well as lower- and middle-income households.

Oil prices have remained a key reason behind inflationary pressure since the U.S.-Iran war began in late February. Inflation moderated somewhat in June and July as crude prices declined, but renewed tensions in the Middle East have once again pushed oil prices higher.

With neither side showing clear signs of moving toward negotiations, consumers are increasingly concerned that oil prices could rise further, keeping inflation elevated for longer.

The latest consumer sentiment data followed a Conference Board report showing that consumer confidence fell to 89.4 in August, its lowest level since January. The figure was down from a downwardly revised 90.2 in July and came in well below economists’ expectations of 90.2.

Meanwhile, the Federal Reserve is considering a 25-basis-point interest-rate cut this year but has so far maintained a cautious, wait-and-see approach. Any rate cut would lower borrowing costs, potentially supporting consumer spending, although continued weakness in sentiment could keep financial markets volatile for an extended period.

3 Healthcare Funds to Buy

We have selected three healthcare funds that are safe bets during this time of market volatility. Moreover, these funds have encouraging three and five-year returns. 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 in identifying 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).

Vanguard Health Care Fund invests the majority of its net assets in the common stocks of foreign and domestic companies. These companies are engaged in the development, production, or distribution of products and services related to pharmaceutical and medical supply companies, as well as businesses that operate hospitals and other healthcare facilities.

VGHCX’s 3-year and 5-year annualized returns are 6.7% and 5.1%, respectively. Vanguard Health Care Fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.33%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Janus Henderson Global Life Sciences D fund primarily invests in equity securities issued by companies engaged in life sciences orientation.

JNGLX’s 3-year and 5-year annualized returns are 12.9% and 8.4%, respectively. Janus Henderson Global Life Sciences D fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.79%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Health Care fund seeks capital appreciation. FSPHX normally invests 80% of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of products or services used for or in connection with healthcare or medicine.

FSPHX’s 3-year and 5-year annualized returns are 9.4% and 3.8%, respectively. Fidelity Select Health Care fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.62%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research



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