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Kent Thune

Stock Funds for Rising Interest Rates

By May 31, 2013

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If the financial media pundits are correct, the Federal Reserve will begin raising rates again in the not-too-distant future. Are there mutual funds that can do well in that environment? The short answer is... yes.

The best type of mutual fund in a rising interest rate environment is growth stock mutual funds.  Typically the Fed tightens policy (raises rates) in a growing economy.  As the name implies, growth stock mutual funds typically perform best in the mature stages of a market cycle when the economy is growing at a healthy rate. The growth strategy reflects what corporations, consumers and investors are all doing simultaneously in healthy economies--gaining increasingly higher expectations of future growth and spending more money to do it.

Large companies also tend to manage the conflicting crosswinds of rising interest rates and growing economy. So you can consider the large growth category of funds. Some of the best large growth mutual funds, such as Fidelity Growth Company (FDGRX) and Vanguard Primecap Core (VPCCX) are closed to new investors.  However, you can check out Fidelity Focused Stock (FTQGX) or Clearbridge Aggressive Growth (LMPRX), both of which are open to new investors, have below-average expense ratios, high performance ranks for short-term and long-term and they have long manager tenure.


Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.

December 19, 2013 at 12:54 am
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