Performance of Financial Sector Mutual Funds during Different Cycles.

Financial mutual funds invest in stocks of financial institutions like banks, brokerages, asset management, fintech, etc. These funds also pay regular dividends to investors. Therefore, they are attractive to investors looking to diversify into the financial sector or searching for yield or dividends. We evaluate the performance of all Financial mutual funds from 1990 to 2023 and compare them to US stocks, dividend stocks, and international stocks. We find that Financial mutual funds had higher absolute returns and risk than the other three portfolios. As far as risk-adjusted performance, Financial mutual funds underperformed US and dividend stocks but outperformed international stocks. Financial fund managers do not have any market timing or selectivity. The Financial sector is also cyclical. Therefore, we also compute the performance of these categories during the three major recessions: the 2000 dot-com crash, the 2007 financial crash, and the 2020 Covid-19 crash. Financial funds performed better during the 2000 dot-com crash, but they lost more value during the 2007 financial crash and the 2020 Covid-19 crash, than the other three portfolios. [ABSTRACT FROM AUTHOR]