3 Financial Mutual Funds to Buy as Rate Cuts Slow Down in 2025

Fed Chair Jerome Powell suggested at the conclusion of the Fed December meet that while the central bank would still be cutting rates moving into 2025, it would happen at a much slower pace than projected earlier. While in September four cuts were anticipated for the new year, currently Fed officials are looking at a maximum of two.This entails that interest rates will remain reasonably high for the foreseeable future. When interest rates are high, banks and other financial institutions generally see higher profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits increase and boost net interest margins.Stocks of banks, insurance companies and other financial institutions go up during high interest-rate periods. This is because financial services companies can earn more on the money they have and on the credit they issue to their customers. As a result, with the first rate-cut announcement delayed till September, the S&P 500 Financials Select Sector SPDR (XLF) soared 30.6% in 2024.Similarly, earlier this month, the central bank projected that core inflation will hit 2.5% next year before cooling to 2.2% in 2026 and 2% in 2027. This should prompt the Fed to hold interest rates high, which in turn boosts the financial sector.For these reasons, financial mutual funds might provide much-required stability in a high-rate environment market. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).We have thus selected three financial mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000 as well as carry a low expense ratio.T. Rowe Price Financial Services PRISX seeks long-term growth of capital by investing the majority of its net assets in common stocks issued by companies engaged in providing financial services to consumers and industry. PRISX advisors aim to invest in high quality companies with good appreciation prospects.Matt J. Snowling has been the lead manager of PRISX since June 2021, and 80.2% of the fund is invested in the financial sector. Three top holdings for PRISX are 4.3% in Wells Fargo, 4.2% in Citigroup and 3.9% in Visa.PRISX’s 3-year and 5-year annualized returns are 14.1% and 16.1%, respectively. Its net expense ratio is 0.83% compared to the category average of 1.09%. PRISX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Brokerage & Investment Management FSLBX invests in securities of companies principally engaged in the exchange of financial instruments, stock brokerage, commodity brokerage, investment banking, or related investment advisory and financial decision support services. FSLBX invests primarily in common stocks.Nadim Rabaia has been the lead manager of FSLBX since June 2023, and 75.6% of the fund is invested in the financial sector. Three top holdings for FSLBX are 9.2% in Moody’s, 6.3% in KKR & Co. and 5.4% in S&P Global.FSLBX’s 3-year and 5-year annualized returns are 15.8% and 21.5%, respectively. Its net expense ratio is 0.69% compared to the category average of 1.22%. FSLBX has a Zacks Mutual Fund Rank #1.Fidelity Select Financials Portfolio FIDSX seeks long-term growth of capital by investing the majority of its net assets in common stocks issued by companies providing financial services to consumers and industry. FIDSX offers dividends and capital gains twice a year, in September and December.Matt Reed has been the lead manager of FIDSX since May 2019, and 79.2% of the fund is invested in the financial sector. Three top holdings in FIDSX are Mastercard (10%), Wells Fargo (6.5%) and Bank of America (5.3%).FIDSX’s 3-year and 5-year annualized returns are 15.7% and 15.4%, respectively. Its net expense ratio is 0.76% compared to the category average of 1.22%. FIDSX has a Zacks Mutual Fund Rank #1.Want key mutual fund info delivered straight to your inbox?Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>Just Released: Zacks Top 10 Stocks for 2024Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FSLBX): Fund Analysis Report Get Your Free (FIDSX): Fund Analysis Report Get Your Free (PRISX): Fund Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks