Inflation cooled in February, bringing some respite to the markets. However, the euphoria was short-lived as stocks resumed their decline on Thursday, with the S&P 500 entering correction territory.
Ongoing global tensions, President Donald Trump’s tariffs and uncertainty over the next rate cut persist, which could keep markets volatile. Given this situation, it would be safe to invest in healthcare funds, to safeguard their investments.
Three such funds are Vanguard Health Care Fund VGHCX, Fidelity Select Health Care FSPHX and Janus Henderson Global Life Sciences D JNGLX.
Fresh data released on Wednesday showed that the consumer price index (CPI) rose 0.2% sequentially in February, below the consensus estimate of a rise of 0.3%. Year over year, CPI increased 2.8% in February, which was also lower than analysts’ expectations of a rise of 2.9%.
Core CPI, which excludes the volatile food and energy prices, climbed 0.2% sequentially in February and 3.1% from the year-ago levels, both below the consensus estimates. Stocks tried to stage a comeback following the release of the report but volatility returned a day later, with the S&P 500 entering correction territory after falling 1.4% on Friday. The Nasdaq had already entered correction territory earlier this month.
Inflation has been on the rise over the past few months and finally showed signs of cooling for the first time in February. However, price pressure continues to hurt consumers as inflation is still sharply higher than the Federal Reserve’s 2% target.
Stubbornly high inflation compelled the Federal Reserve to halt rate cuts in its January meeting. The Federal Reserve has adopted a cautious approach and is unlikely to cut interest rates in its upcoming March meeting.
Uncertainty over the economy’s health has grown over the past several weeks as investors fear that Trump’s tariff policies could trigger a global trade war, which could see the economy slipping into recession.
Trump has already imposed 25% tariffs on several Canadian and Mexican imports. Additionally, he has imposed 10% tariffs on Chinese goods and shared plans to impose tariffs on the European Union.
Trump’s tariffs have intensified market turmoil, causing stock fluctuations. This volatility is expected to persist until investors gain a clearer understanding of his tariff policies. Given this situation it would be ideal to invest in funds from defensive sectors such as healthcare.
Investors frequently turn to the healthcare sector to protect their investments, as demand for healthcare services remains relatively stable regardless of market fluctuations. This consistency helps safeguard capital. Additionally, many pharmaceutical companies provide regular dividends, indicating financial stability and reliable cash flow generation, even during uncertain market conditions.
We’ve identified three healthcare mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
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 15.3% and 7.2%, respectively. Vanguard Health Care Fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.38%.
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 its 80% of 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 5.2% and 7.2%, respectively. Fidelity Select Health Care fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.63%.
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 8.1% and 9.6%, respectively. Janus Henderson Global Life Sciences D fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%.
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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