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Monday, January 2, 2017

How To Invest In 2017: The 5 Best Mutual Fund Ideas

How To Invest In 2017: The 5 Best Mutual Fund Ideas

What should you put on your investing shopping list in 2017? Here are the five best mutual fund ideas from investment strategists and asset managers.

Driehaus Emerging Markets Small Cap Growth Fund (DRESX)

By Chris Kim

Driehaus Emerging Markets Small Cap Growth Fund (DRESX), with $319 million in assets, employs a growth equity investment philosophy. Small-cap EM companies exhibit some of the best growth prospects across global equity markets. But they are often overlooked by investors and under-researched by Wall Street, leading to a less efficient asset class.

A textile worker at a factory in China's northern Henan Province. China's industrial output and retail sales growth both accelerated in November, government data showed Dec. 13, 2016. ( STR/AFP/Getty Images)

The larger-cap EM index is dominated by state-affiliated companies, exporters and commodity producers whose growth is often dependent on global gross domestic product. Small-cap EM stocks are geared much more heavily to domestic economies, tapping into the long-term secular trends of favorable demographics, urbanization, an emerging middle class, and rising consumption. Long-term track records are strong. But the style is sometimes out of favor, as has been the case throughout 2016.

While the one- and three-year performance figures have come under pressure, the longer-term numbers are strong. And their approach has worked over full market cycles.

Chris Kim is chief investment officer of Tompkins Financial Advisors with $3 billion under management in Ithaca, NY.

Ridgeworth Seix Floating Rate High Income Fund (SAMBX)

By Craig Bolanos

The continued focus of the U.S. Federal Reserve and their counterpart central banks around the globe on keeping interest rates extremely low has led to an extreme inflation in the value of investment grade and government bonds. This, in turn, has set up the potential for income investors to be caught in a potential disaster.

Central bankers around the globe have focused on keeping rates extremely low in the hopes of creating business spending and leading to more jobs and hence higher wages. This policy has been ingrained since the Great Recession as these Central Bankers are incredibly fearful of even the slightest hint of an economic downturn. Once interest rates start to lift off in a meaningful way, many bond investors who have turned to bond funds and bond exchange-traded funds will find themselves at unexpected losses.

This conundrum leads to us to recommend a solution for a part of your portfolio in 2017: floating-rate bond funds.

Assuming interest rates continue to rise (remember the "Taper Tantrum of 2013" and the recent "Trump Tantrum of 2016"), then investors might well benefit from an allocation to floating-rate bond funds. Rising interest rates are usually negative for the vast majority of bond funds. However, investments that hold paper, which float (hence the nickname "floaters," "bank loan funds," etc.) might just be the ingredient bond investors need to help ride out the pending bond market meltdown.

Floating-rate funds are usually tied to a benchmark such as LIBOR plus a spread. When interest rates rise, these bonds might actually increase in value. In periods when an investor might expect rising interest rates, owning a floating-rate fund might just be a very sensible investment.

Craig Bolanos is founder and CEO of Wealth Management Group with $350 million under management in Inverness, Ill.

Vanguard FTSE All-World ex-US Index Fund (VFWIX)

By Jon Luskin, MBA, CFP

Are stocks expensive? Yes. But, don’t take my word for it. If you want to see how today’s stock prices stack up, comparing valuations over time should do the trick. The metric we’ll use is called the CAPE ratio. This form of measurement was created by American Nobel Laureate and economist Robert Shiller.