US President Donald Trump called for unity among Americans and cross-party cooperation during last Tuesday’s State of the Union Address. Trump expressed interest to rebuild the U.S. military by bumping up Pentagon’s budget. He also plans to reevaluate military alliances and agreements with foreign nations.
Trump did approve two defense-friendly budget bills that helped increase the Pentagon’s budget to $700 billion in 2018 and $717 billion in 2019. Meanwhile, Trump said that “for years, the United States was being treated very unfairly by NATO, but now we have secured a $100 billion dollar increase in defense spending from NATO allies.” Lest we forget, Trump had earlier threatened to trim U.S. military support if its allies didn’t raise defense spending.
At the same time, America is looking to develop a state-of-the-art missile defense system. And it’s only because Russia repeatedly violated the agreement by building banned weapon. Trump announced that “the United States is officially withdrawing from the Intermediate-Range Nuclear Forces Treaty, or INF Treaty.” Last but not the least, Trump claimed that American astronauts will go back to space with American rockets.
Trump in his speech, by the way, has also asked for a bipartisan infrastructure push. He urged both the parties to come together in rebuilding America’s decaying infrastructure. Trump told Congress and government leaders that “I know that Congress is eager to pass an infrastructure bill, and I am eager to work with you on legislation to deliver new and important infrastructure investment.”
2 Funds to Benefit
With Trump vowing to boost defense budget as well as urging the Congress to rebuild America’s crumbling infrastructure, it seems investing in the following funds with significant exposure to such areas seems judicious.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Defense & Aerospace Portfolio FSDAX, a Zacks Ranked #1 (Strong Buy) fund, seeks capital appreciation. The fund invests primarily in common stocks. It invests at least 80% of assets in securities of companies principally engaged in the research, manufacture, or sale of products or services related to the defense or aerospace industries.
This Sector-Other fund, as of the last filing, allocates fund in three major groups — Large Value, High Yield Bond and Small Growth. Further, as of the last filing, Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC) and United Technologies (NYSE:UTX) were the top holdings for FSDAX.
The Fidelity Select Defense & Aerospace Portfolio fund, managed by Fidelity, carries an expense ratio of 0.76% versus the category average of 1.19%. Moreover, FSDAX requires a minimal initial investment of $2,500. The fund has three and five-year returns of 21.7% and 12.6%, respectively.
Fidelity Select Construction & Housing Portfolio FSHOX, a Zacks Ranked #2 (Buy) fund, seeks capital appreciation. The fund normally invests at least 80% of assets in securities of companies principally engaged in the design and construction of residential, commercial, industrial, and public works facilities.
This Sector-Other fund, as of the last filing, allocates fund in three major groups — Large Value, Intermediate Bond and Small Growth. As of the last filing, Home Depot (NYSE:HD), Lowe’s (NYSE:LOW) and Avlonbay Communities were the top holdings for FSHOX.
The Fidelity Select Construction & Housing Portfolio fund, managed by Fidelity, carries an expense ratio of 0.79% versus the category average of 1.34%. Moreover, FSHOX requires a minimal initial investment of $2,500. The fund has three and five-year returns of 10.1% and 9.1%, respectively.
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Zacks Investment Research