Markets have been on an uptrend lately, as the recent easing of bank meltdown worries has been a welcome development. This is because it signals that the economic environment is improving, which bode well for investors.
With improved investor confidence, more money can be invested in stocks, bonds, and other securities, leading to higher returns. Therefore, it is safe to say that this news is positive for the market, as it could lead to higher returns and more stability.
The recent debacle at Silicon Valley Bank (“SVB”) sent shockwaves across the financial sector, leading to a meltdown and causing a sharp decline in stock price. It involved the mismanagement of funds from a high-profile venture capital firm, resulting in losses of over $1 billion for the investor. This raised questions about corporate governance and accountability within SVB, which had failed to monitor its investments.
With the Federal Reserve stepping in and assuring depositors that their deposits are secure, the chances of a bank run have been significantly reduced. However, the situation is still far from ideal, as bigger banks have been forced to take over the ailing ones in order to keep the sector afloat. This assures depositors that their money is safe and secure, even during times of financial distress.
Moreover, Fed's decision to pause raising interest rates is a positive sign for the market. In the current economic climate, market participants are not expecting a rate hike when the Federal Reserve meets in May. This is due to a number of factors, such as weak economic data and global uncertainty about inflationary pressure.
Investors can take advantage of lower borrowing costs and increased liquidity in the markets. This will help boost economic growth and create a more stable environment for businesses, which could lead to higher stock prices. Additionally, the pause could benefit those looking to invest in long-term assets, as it will give them more time to make informed decisions about their investments. Overall, the Fed’s rate pause is a positive development that should benefit investors and businesses alike.
Given such positives, it’s prudent for astute investors to place their bets on growth mutual funds for now. Also, mutual funds, in general, diversify portfolios without the several commission charges that are mainly associated with stock purchases and trim transaction costs (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Thus, we have selected two such mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, require minimum initial investments of less than $5000, and have a low expense ratio.