The retail sector is bouncing back strongly after taking a major blow during the peak of the pandemic, followed by uneven sales over the past year. This year, so far, has been good, with sales picking up in all the three months, which is a good sign for retailers as they finally breathe easy.

Although rising costs have been a worrying factor, people are still willing to spend, thanks to higher personal income and spending. Thus, funds like Fidelity Select Consumer Discretionary Portfolio (FSCPX Quick QuoteFSCPX - Free Report) , Fidelity Select Construction & Housing Portfolio (FSHOX Quick QuoteFSHOX - Free Report) andFidelity Select Retailing Portfolio (FSRPX Quick QuoteFSRPX - Free Report) , are likely to benefit in the near term.

Retail Sales Soaring

According to the latest Mastercard SpendingPulse report, retail sales excluding vehicle sales, increased 8.4% year over year in March. Moreover, sales grew 18% compared to the pre-pandemic period. The report also mentions that sales in March were driven by the services industry.

This saw airline travel soaring 44.8% year over year in March, while restaurant sales and hotel bookings jumped 19.1%. This indicates that consumer spending on services is picking up again, which is beneficial to the retail sector.

The pandemic had hit the retail sector severely that saw people cutting down on spending on services. However, offices, industries and school are reopening and people spending more on services once again.

The jump in spending on services hasn’t hampered spending on goods. Sales of apparel and luxury products climbed 16% and 27.1%, respectively. Department store sales jumped 14%.

In-store sales have also increased as people feel more comfortable leaving their homes. In-store sales increased 9.4% in March from the pre-pandemic levels.

The jump comes despite rising commodity prices, which has seen inflation figures soar to a 41-year high. Even then, people are not hesitant about spending, which has been driving retail sales. One major reason behind this is a rise in personal income and spending. Personal income rose 0.5% in February, while spending increased 0.2%.

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to the retail sector that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their 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 also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Consumer Discretionary Portfolio fund aims for capital appreciation. FSCPX invests the majority of its assets in securities of companies typically engaged in production, distribution and marketing of consumer discretionary products. Fidelity Select Consumer Discretionary Portfolio fund invests in both U.S. and non-U.S. issuers.

Fidelity Select Consumer Discretionary Portfolio has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 16.3% and 15.5% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76% versus the category average of 0.79%.

Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 17.3% and nearly 17.9% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.

Fidelity Select Construction & Housing Portfolio fund seeks capital growth. FSHOX invests in common stocks and most of its assets in the designing and construction of residential, commercial and industrial facilities etc.

Fidelity Select Construction & Housing Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FSHOX has returned 23.8% and 17.5% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSHOX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%, which is below the category average of 0.79%.

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