Mutual Funds and Understanding Your Options

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Written by

Carson Burke |Publish date: November 10th, 2020

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Hopefully, you found your way here wanting to invest on your own but not understanding what funds to choose. This won't solve all your problems but it's a great place to start. 

The use of funds is a staple of diversification used by investors of all levels. Funds have a specific objective within their asset category. The asset allocation used in a fund portfolio is dependent on a lot of factors and is worth careful examination. That being said, within each category of fund, 3rd party researches examine the quality of these funds. The purpose of this article is to cover a basic level of some common funds with a capital appreciation style- a frequent goal for working people in retirement accounts. These are some common funds that should be on an investor's radar to do further research on or consult with a financial professional about.

1. JP Morgan Growth Advantage (VHIAX)

  • Asset Class: US All Cap Stocks

  • Style: Capital Appreciation

  • Morningstar Category: Large Growth

About this fund:

 

It provides an allocation primarily to U.S. large-cap stocks, with smaller allocations to U.S. small- and mid-cap stocks. It has a capital appreciation style. This fund is managed as a best-ideas portfolio from across JP Morgan's U.S. equity research platform. We expect it will provide diversified exposure to JP Morgan's stock research across both large and small companies, with relative performance coming primarily from stock selection.

Dont forget to always take advantage of your employer's match. It may not have the best options and even a higher fee, but at the end of the day you will be better off if you take their free money match.

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2. Franklin Templeton Dyna Tech (FKDNX)

  • Asset Class: US Large Cap Stocks

  • Style: Capital Appreciation

  • Morningstar Category: Large Growth

About this fund:

The fund invests in a diversified portfolio of companies that management believes will drive innovation and benefit from cutting-edge technologies. Frequently, these companies are less profitable and have higher price-to-earnings ratios, which may lead to wider swings in performance, making it complementary to many Growth & Income funds. While many large growth funds invest in innovative, higher-growth companies, few combine this with Dynatech's long time horizon and sensitivity to risk. The fund is managed by a single portfolio manager, creating "key person risk" (reliance on a single individual), which could lead to less continuity in the process over time. We expect asset turnover to be low, and the expense ratio is well below peers, which provides a tangible, reliable benefit.

3. BlackRock Mid Cap Growth (BMGAX)

  • Asset Class: US Mid Cap Stocks

  • Style: Capital Appreciation

  • Morningstar Category: Mid Cap Growth

About this fund:

This fund can be used as a core, long-term holding within the Growth category. It provides an allocation to U.S. mid-cap stocks with a capital appreciation style. The fund invests in 55-85 stocks of companies whose growth prospects are being misunderstood or mispriced by the market, according to the team. In order to balance the macroeconomic or style risks in the portfolio, the team invests in a fairly stable blend of different types of growth companies, those demonstrating superior growth, durable growth, or economically-sensitive growth with a bias towards durable growth. The resultant portfolio tends to have a higher valuation, growth and volatility profile.

4. JP Morgan Small Cap Growth (PGSGX)

  • Asset Class: US Small-Cap Stocks

  • Style: Capital Appreciation

  • Morningstar Category: Small-Cap Growth

About this fund:

This fund can be used as a long-term holding within the Growth category. It provides an allocation to U.S. small-cap stocks with a capital appreciation style. The fund invests in companies it believes have high growth opportunities and good earnings momentum. Because these are earlier-stage companies, the team is more focused on a competitive edge and management than today's profitability level. While we expect the fund to perform well over the long term, it is important for investors to understand these factors will likely lead the fund to underperform when the stock market drops.

5. PGIM Jennison Global Opportunities (PRJAX)

  • Asset Class: Global Large Cap Stocks

  • Style: Capital Appreciation

  • Morningstar Category: World Stocks

About this fund:

This fund can be used as a core, long-term holding within the Growth & Income category. It provides an allocation to U.S. large-cap stocks and international large-cap stocks. It has a capital appreciation style. PGIM Jennison Global Opportunities provides a concentrated portfolio of both U.S. and international growth stocks. This fund seeks to consistently have higher valuations than the broad market and greater exposure to high growth sectors such as technology. This fund may be expected to have a higher number of emerging markets stocks compared to its peers. In general, this fund tends to deliver strong results in rising market environments.

 

The portfolio is managed by Mark Baribeau, an experienced investor who has a strong historical track record, and is supported by sector analysts. The team seeks to outperform by identifying disruptive trends and businesses before they are fully appreciated by the market. The portfolio manager believes that these disruptive businesses will go on to experience longer and stronger growth rates than what is reflected in the stock price at the time of purchase.

6. PGIM Jennison International Opportunities (PWJAX)

  • Asset Class: International Large-Cap Stocks

  • Style: Capital Appreciation

  • Morningstar Category: Foreign Large Growth

About this fund:

PGIM Jennison International Opportunities provides a concentrated portfolio of international growth stocks. Same management and team as the PGIM Jennison Global, but this fund only holds international stocks (and does not hold the US stocks held in Global Opportunities).

Executive Summary

The use of mutual funds is great for investors to achieve adequate diversification and benefit from pooling their money into professionally managed portfolios. While a lot goes into what makes a good investment for the specific individual, the goal of this article is to highlight some highly rated funds (by third party sources) that should be further researched by the investor. These investments are tools used by many investors to reach their financial goals. However, the time horizon, as well as the investor's tolerance for volatility, will play an important role in portfolio construction. 

Here is the simple guide of how to invest

READ HERE

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