Oil Is On The Cheap, Consumer Confidence is High and Americans have extra cash in their pockets
The new year is right around the corner and the financial and business landscape is changing.
Oil is at the lowest prices we’ve seen in years which results in lower fuel prices and overall consumer confidence.
We need to take this into account when looking for the best mutual funds to invest in for 2015 as targeted mutual funds and specific ETFs are poised to outperform the broader market.
Top Sectors To Invest In For 2015
We’re going to center our 2015 investment strategy around the lower cost of oil, fuel and gasoline. WE’re also going to take a strong look at consumer electronics. That being said, our 2015 investment strategy will be in the following sectors: Airlines, Retail, Consumer Electronics.
Invest In Airlines for 2015
Airlines are poised to have a stellar year mainly to to the lower cost of jet fuel thanks in-part to the rock-bottom oil prices. While airlines have been struggling in the past few years, they have had to become creative in cost-cutting and operating more efficiently. They did this by eliminating free meals, reducing the number of flights and charging higher fares. With jet fuel prices taking a steep drop, the airlines look to profit handsomely.
Don’t expect to get your free lunch back when on an airplane, and also, don’t expect your air fares to decline. No way, it’s time for the Airlines to use their model that worked when they were struggling and reap the rewards now that margins on jet fuel have widened.
Fidelity® Select Air Transportation Portfolio (FSAIX)
The Fidelity Select Air Transportation Portfolio should be a winner for 2015. This airline-focused mutual fund for 2015 invests primarily in companies engaged in the regional, national, and international movement of passengers, mail, and freight via aircraft. This fund will usually hold at least 80% of assets in securities these types of companies and will hold common stock.
Invest in Retail Mutual Funds for 2015
Along with the airlines, the retail sector is also primed to have a stellar 2015. With oil at record-low prices, consumers will have extra money in their pockets to spend at their favorite retailers. Eventhough $50 to $100/mo does not seem like much, it actually represents between 8% and 15% of an average consumer’s monthly discretionary budget – and those are huge numbers for retailers.
Vanguard Consumer Discretionary Index Fund Admiral Shares (VCDAX)
The Vanguard consumer discretionary index fund is in great position to take advantage of the increase in consumer spending. Like we said above, spending will continue to increase due to the lower fuel prices and also the increase in consumer confidence and rebound of the jobs market.
The VCDAX is a low-cost index fund that offers exposure to the consumer discretionary sector of the U.S. equity market, which includes stocks of companies that manufacture products and provide services that consumers consider nonessential, such as retailers, restaurants, and media companies. Think eating out, purchasing DVDs, going to theme parks, staying in hotels for weekend trips or even going to Disney World (DIS).
SPDR® S&P® Retail ETF
If you’re looking for something more strictly focused in the retail sector (think Target, Under Armour, WalMart) you could consider the SPDR® S&P® Retail ETF. The SPDR® S&P® Retail ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P®Retail Select Industry® Index.
Consumer Electronics Sector for 2015 Investments
We also believe that more discretionary income will mean increased purchases in consumer electronics. From the purchase of phablets to phone upgrades, we think this sector will also have a strong 2015.
Fidelity® Select Electronics Portfolio
The Fidelity Select Electronics Portfolio invests in companies that manufacture parts for various consumer electronics products. This fund invests primarily in companies engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards and other components).
By investing in the parts, you don’t get tied to one specific type of electronic item, but the whole sector as most of them use the same parts.
2015 Will be a great year for the broader stock market
We are anticipating that 2015 will be a stellar year for the sectors outlined above, but we also think that stocks as a whole will benefit from favorable economic conditions. For this reason, we want to sink some of our money into straight-up mutual funds that focus on growth.
Vanguard Small-Cap Growth Index Fund Investor Shares
The Vanguard growth index fund invests in stocks of smaller U.S. companies in market sectors that tend to grow more quickly than the broad market. If the market is going to have a good year overall, this fund should really outperform. By investing in a growth fund in which the market has great gains, you’re increasing your chances of making a killing in 2015.
Small cap stocks tend to perform well in favorable market and economic conditions so we look for this fund to have an awesome 2015.
Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX)
We are also taking a look at the emerging markets, because we believe that not only the U.S. will benefit from lower oil prices. We also need to realize that we are entering into a more global economy and should have some exposure into the emerging markets where growth can be profound.
Therefore, one of the best mutual funds for 2015 investments would be the Vanguard Emerging Markets Stock Index fund. The fund invests in stocks of companies located in emerging markets around the world, such as Brazil, Russia, India, Taiwan, and China.
Fidelity® Emerging Markets Discovery Fund
While the Fidelity Emerging Markets Discovery Fund also invests in emerging markets, this fund takes a somewhat riskier investment approach and could provide higher returns. If you are comfortable with some additional risk, we think the payoff could be pretty good in 2015. Like we said, businesses across the board will benefit from the lower oil prices – especially in the emerging markets. I would not really recommend this particular fund for long-term investment (just because I’m not that risky) but for 2015, it might be somewhat lest riskier and the risk/reward balance may lean in your favor.