PRISX Or FAFDX: Which Financial Fund Should You Buy?

Mutual fund investors eyeing impressive returns on their investments could consider parking their money in the financial services space. After all, mutual funds are the perfect way to invest in a diversified pool of assets, which offers investors an option to shield their investments from inflation, market risks and lofty transaction costs.

In addition, when it comes to the financial sector, investors can expect transparency since companies operating in the arena are extremely regulated and strongly monitored. This close vigilance offers investors the possibility of reaping handsome returns over a given period.

Notably, the sector has performed decently since 2015. The Financial Select Sector SPDR Fund (XLF) has gained 38.3% in the past five years. In fact, the sector ranks fourth in terms of witnessing maximum growth among the broader S&P 500 sectors in the said timeframe.

Thus, investing in mutual funds from the financial sector is ideal right now. Let us compare two best funds from this space, each sporting a Zacks Mutual Fund Rank #1 (Strong Buy), and find out which emerges as a clear winner for investment purposes.

T. Rowe Price Financial Services Fund (PRISX)

PRISX seeks long-term capital appreciation and a decent level of income. The fund invests the majority of its assets in securities of financial services industry. PRISX is a non-diversified fund.

This Sector-Finance product has a history of positive total returns for over 10 years. Specifically, PRISX has rallied 17.4% over a year. The fund’s returns are 10.7% of the 3-year and 11.4% of the 5-year period. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

The T. Rowe Price Financial Services Fund, as of the last filing, allocates its assets to top two major groups, namely Large Value and Foreign Bond. Further, as of the last filing, Wells Fargo (NYSE:WFC) & Co, Chubb (NYSE:CB) Ltd and Citigroup Inc (NYSE:C) were the top holdings for PRISX.

PRISX was incepted on Sep 30, 1996. It carries an expense ratio of 0.87%. The fund requires a minimal initial investment of $2500.

Fidelity Advisor Financial Services Fund Class A (FAFDX)

FAFDX aims for capital growth. The fund invests the majority of its assets in securities of companies that provide financial services to consumers. The fund invests in U.S. and non-U.S. issuers alike. FAFDX mostly invests in common stocks.

This Sector-Finance product has a history of positive total returns for over 10 years. Specifically, FAFDX has returned 18.9% over a year. The fund’s returns are 9.5% of the 3-year and 9.8% of the 5-year period. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

The Fidelity Advisor Financial Services Fund Class A, as of the last filing, allocates its assets to top two major groups, such as Large Value and Small Value. Further, as of the last filing, Citigroup Inc, Bank of America Corp (NYSE:BAC) and Berkshire Hathaway (NYSE:BRKa) Inc B were the top holdings for FAFDX.

FAFDX was incepted on Sep 3, 1996. It carries an expense ratio of 1.08%. The fund requires no minimal initial investment.

Conclusion

Taking a closer look at PRISX and FAFDX, we find that the former proves to be a better option. Although both funds flaunt a Zacks Mutual Rank #1, PRISX provided investors with better returns over the 3- and 5-year periods compared to FAFDX. PRISX carries a lower expense ratio as well.

Additionally, PRISX has lower risk associated with it (three-year beta of 0.93 compared with FAFDX’s 1.09)

To wrap up, one may consider the returns provided by these two funds in the last reported quarter. PRISX returned 9.9% while FAFDX returned 6.8% in fourth-quarter 2019.

Therefore, investors who prefer higher returns with lower appetite for risk must opt for PRISX. This is because the prevalent market conditions aren’t exactly encouraging at present and one would do well to bet on the fund.

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