Is PGIM Financial Services A (PFSAX) a strong choice for mutual funds right now?

IIf you get stuck in your search for Sector – Finance funds, you should consider referring to PGIM Financial Services A (PFSAX) as an option. PFSAX holds a Zacks Mutual Fund Rank 4 (Sell) based on nine forecast factors such as size, cost and past performance.

Goal setting

PFSAX is classified under the Sector – Finance segment by Zacks, and that area is full of opportunity. The financial space is notoriously large, complex, and highly regulated, and sector financial mutual funds offer investors a stable, diversified approach to investing in the industry. These funds can include anything from banks and investment giants to stock exchanges and insurance companies, although investors should be aware that interest rates could have a huge impact.

History of the fund / manager

PGIM is based in Providence, RI and is the manager of PFSAX. PGIM Financial Services A debuted in June 1999. Since then, according to the latest information available, PFSAX has amassed approximately $ 74.70 million in net worth. A team of investment professionals is the current manager of the fund.

perfomance

Investors naturally look for funds with a strong performance. PFSAX has an annualized 5-year total return of 17.6% and is in the top third of its competitors in the category. However, if you’re looking for a shorter time frame, it’s also worth checking out the 14.48% annualized 3-year total return, which puts it in the top third over that period.

When looking at the performance of a fund, it is also important to consider the standard deviation of returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of the PFSAX over the last three years is 26.02% compared to the category average of 18.05%. The fund’s standard deviation over the past 5 years is 20.73% compared to the category average of 14.91%. This makes the fund more volatile than its peers over the past half decade.

Risk factors

Investors shouldn’t forget about beta, an important way to measure a mutual fund’s risk versus the overall market. PFSAX has a 5 year beta of 1.24 which means it will likely be more volatile than the market average. Another factor to consider is alpha, as it reflects the risk-adjusted performance of a portfolio versus a benchmark – in this case the S&P 500. PFSAX has posted a negative alpha of -2.91 over the past five years, showing that managers in this portfolio have a hard time picking stocks that will outperform the benchmark.

Holdings

Exploring a mutual fund’s stock holdings is also a valuable exercise. This can show us how the manager is applying his stated methodology and whether there are inherent biases in his approach. For this particular fund, the focus is largely on stocks that are traded in the United States.

The mutual fund currently holds 76.32% of its holdings in stocks with an average market capitalization of $ 136.91 billion. The turnover of this fund is around 38%, so the fund managers make fewer trades than comparable funds.

costs

Cost is becoming increasingly important for mutual fund investments, especially as competition in this market intensifies. All other things being equal, a cheaper product will outperform its otherwise identical counterpart. It is therefore important for investors to take a closer look at these metrics. In terms of fees, PFSAX is a load fund. It has an expense ratio of 1.39% compared to the category average of 1.54%. If you look at the fund from a cost perspective, PFSAX is actually cheaper than its competitors.

This fund requires a minimum initial investment of $ 1,000 and any subsequent investment should be at least $ 100.

Bottom line

Overall, PGIM Financial Services A (PFSAX) ranks low in the Zacks Mutual Fund, and coupled with its comparatively strong performance, poorer downside risk and lower fees, this fund appears to be a slightly poor choice for investors at the moment.

For more information on the Sector – Finance of the mutual fund world, please visit www.zacks.com/funds/mutual-funds. There you can learn more about the ranking process and dive even deeper into PFSAX for additional information. Would you like to find out more? We have a full suite of tools for stocks to help you make the best choices for your portfolio too, no matter what type of investor you are.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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