The Zacks Analyst Blog Highlights:Fidelity Select Health Care Portfolio, T. Rowe Price Global Technology and ICON Healthcare S

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Nov 06, 2014, 09:30 ET

CHICAGO, Nov. 6, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Fidelity Select Health Care Portfolio (Nasdaq:FSPHX-Free Report), T. Rowe Price Global Technology (Nasdaq:PRGTX-Free Report) ICON Healthcare S (Nasdaq:ICHCX-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Commingled Funds vs. Mutual Funds: Which I Best for Your Retirement?

Often times, investors starting off may be confused with what commingled funds are. Investopedia defines the term as "A fund consisting of assets from several accounts that are blended together. Investors in commingled fund investments benefit from economies of scale, which allow for lower trading costs per dollar of investment, diversification and professional money management. "

So on a broader perspective, commingled funds pool assets from various accounts and invests in a basket of financial instruments including mutual funds. However, unlike mutual funds, these are not for retail investors. Commingled funds, being pooled funds or common funds, attract money from several accounts. This is most prominent for the retirement plans or to be specific in 401(k) plans. Commingled funds can mix the capital from qualified employee benefit plans.

Let's look in details into the difference and similarities of commingled funds and mutual funds.

Major Similarities & Differences

The most prominent similarities between commingled funds and mutual funds are limited to the following points:

Both hold financial instruments such as stocks, bonds or both
Both of them are professionally managed by fund managers

As for the differences between the two, the most important one is that a retail investor cannot invest directly into a commingled fund. As said, these are primarily for retirement plans, where assets of qualified employees are pooled into a single fund.

The other major difference between the two is that mutual funds are regulated and have extensive disclosure requirements unlike the commingled funds. Commingled funds are not regulated by the U.S. Securities and Exchange Commission, thus giving them the leeway of not submitting extensive disclosures. The U.S. Office of the Comptroller of the Currency and state regulators however oversee commingled funds. On the other hand, mutual funds must be registered with SEC and are subject to Investment Company Act of 1940.

Advantages & Disadvantages

The fact that commingled funds are not regulated leads to lower legal charges and operating fees. According to Morningstar, median expense ratio for all large-blend mutual fund share classes stands at 1.06% while the same for institutional share classes it is just 0.75%. However, collective investment trust (CIT) large-blend share classes boast median expense ratio of just 0.60%.

However, this leads to a major disadvantage as well. Unlike mutual funds and thanks to their prospectus document, an investor will not get key information related to their commingled funds. A mutual fund prospectus on the other hand provides detailed information such as trading history, fund's fees and investment strategy. Frequent information related to CIT's holdings may be tough to get. Add to that the fact that commingled funds are not publicly traded. Commingled funds do not even have tickers, to allow investors to easily track performance.

Retirement Plan

On that note, a 401(k) investor must carefully read the Summary Plan Description, a document that a commingled fund will offer to investors.

This also brings us to the 401(k) plan, which offers investment in mutual funds among others. A 401(k) plan is a retirement saving plan, much like a pension plan. Named for a section in the tax code, 401(k) plan allows employees to invest a fixed percentage of their salary. The fixed percentage from the salary is deducted before taxes, and no tax is paid until the invested capital is taken out. Employers too must contribute in each employee's plan. In fact, employers often match up the percentage of investment by the employees. (Read: How to Maximize Your 401(k))

Picking Funds for Similar Strategy

As said, individual investors cannot invest directly into commingled funds, which are generally for retirement strategies. However, what retail investors can opt for is investing in mutual funds that offer Individual Retirement Account (IRA). IRA, which stands for both Individual Retirement Account and the broader classification of Individual Retirement Arrangement, is a government regulated individual retirement plan for retirement savings with tax advantage. (Read: What Can IRAs Offer to Mutual Fund Investors?)

Apart from offering IRAs and positive gains over the last 5 and 3 years, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund.

Fidelity Select Health Care Portfolio (Nasdaq:FSPHX-Free Report) invests the majority of its assets in companies whose principal operations include production, design and sales of health care related products or services. The fund focuses on acquiring common stocks and invests in companies all over the globe.

FSPHX boasts 5 and 3-year annualized returns of 27.4% and 36.1%, respectively. It has also gained 28.5% year to date.

The fund has an annual expense ratio of 0.76% as compared to category average of 1.39%. FSPHX carries no sales load. The minimum initial IRA for this fund is $500.

T. Rowe Price Global Technology (Nasdaq:PRGTX-Free Report) invests a large portion of its assets throughout the world in the common stocks of companies that generate majority of their revenues from the development, advancement, and use of technology. The fund invests in a minimum of 5 countries and a minimum of 25% of its assets is invested in foreign companies. It invests in firms with established track records.

PRGTX boasts 5 and 3-year annualized returns of 22.9% and 24.5%, respectively. It has also gained 25.1% year to date.

The fund has an annual expense ratio of 0.95% as compared to category average of 1.49%. PRGTX carries no sales load. The minimum initial IRA for this fund is $1000.

ICON Healthcare S (Nasdaq:ICHCX-Free Report) seeks growth of capital over the long term. The fund invests most of its assets in equities belonging to the Health Care sector. The equity securities include both common stocks and preferred stocks of health care firms irrespective of their market capitalization.

ICHCX boasts 5 and 3-year annualized returns of 21.4% and 30%, respectively. It has also gained 23.7% year to date.

The fund has an annual expense ratio of 1.39% which is at par with the category average. ICHCX carries no sales load. The minimum initial IRA for this fund is $1000.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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