Yahoo Finance 3 Funds to Buy on Steady Rise in Construction Spending
A sharp decline in inflation over the past year is finally giving more confidence to people as price pressures have eased a lot. This has seen a steady rise in construction activity as investments have been growing over the past few months.
The Commerce Department reported a 0.4% month-over-month rise in spending on construction activity in November. Although it came in lower than expectations, construction spending has lately been growing steadily. November’s jump marks the 11th straight month of growth in construction activity.
Year over year, construction spending surged 11.3% in November. Also, data for October was revised up to 1.2% from the earlier reported rise of 0.6%.
The steady rise indicates the underlying strength of the economy. The home building industry is also rebounding as the 30-year fixed mortgage rates fell further to below 7%. Homebuilding accounted for a bulk of the overall construction spending during and after the pandemic.
The trend is back as construction activity is getting a boost from the existing high demand for new single-family homes, which is being spurred by a substantial shortage of available pre-owned homes in the market.
Spending on residential projects increased 1.1% month over month in November. Outlays on new single-family homes rose 2.9%.
The Federal Reserve, which increased interest rates by 525 basis points to fight multi-year high inflation, is also about to end its monetary tightening campaign as inflation has declined sharply over the past year.
Hopes are now high that the Fed will go for at least three rate cuts this year, which is expected to act as a tailwind for the homebuilding sector.
3 Best Choices
As a result, we’ve chosen three funds from the real estate sector that are worth buying. These funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
DWS RREEF Real Estate Securities Fund– Class A RRRAX seeks long-term capital appreciation and current income. RRRAX invests the majority of its net assets in equity securities of real estate investment trusts and real estate companies.
DWS RREEF Real Estate Securities Fund - Class A fund has a 5-year and 10-year annualized return of 3.3% and 3.9%, respectively. The annual expense ratio of 0.75% is lower than the category average of 1.08%. RRRAX sports a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Real Estate Income Fund FRINX seeks current income and capital appreciation. FRINX normally invests in a balanced portfolio of common stocks, U.S. and foreign government securities, and a variety of corporate fixed-income obligations. Fidelity Real Estate Income Fund may invest up to 30% of its total assets in foreign securities.
Fidelity Real Estate Income Fund has a 5-year and 10-year annualized return of 2.8% and 3.5%, respectively. The annual expense ratio of 0.73% is lower than the category average of 1.08%. FRINX sports a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Manning & Napier Real Estate S MNREX fund aims for high current income and long-term capital growth by investing primarily in companies in the real estate industry. MNREX invests at least 80% of its assets in securities of companies that are directly engaged in the real estate industry as well as in industries serving or related to the real estate industry.
Manning & Napier Real Estate S fund has a 5-year and 10-year annualized return of 3.5% and 3.7%, respectively. The annual expense ratio of 0.10% is lower than the category average of 1.08%. MNREX carries a Zacks Mutual Fund Rank #1.
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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