Even as the world’s energy resources are pushed to the limit, the demand for energy continues to rise steadily year over year. This is particularly true for emerging economies such as China and India where energy consumption is rising exponentially. Though efforts to harness alternative energy sources as diverse as oil shale continue, prices for this precious resource continue to rise. However investors could benefit from this phenomenon by investing in the energy sector. Mutual funds focusing on energy are a superior option in this case as they reduce risks involved by holding widely diversified portfolios.

Below we will share with you 5 top rated energy mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all energy funds, then click here.

Rydex Energy ( RYEIX - MF report ) seeks to provide investors long-term capital growth. The fund invests heavily in equity securities and derivatives of energy companies which are traded in the U.S. This energy mutual fund is non-diversified and returned 12.54% over the last one year period.

The energy mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.39% compared to a category average of 1.64%.

Fidelity Select Natural Gas ( FSNGX - MF report ) invests a large proportion of its assets in securities of companies involved in the production of natural gas as well as transmission and distribution activities. The fund also purchases securities issued by explorations companies. The energy mutual fund has a three year annualized return of 8.85%.

As of October 2011, this energy mutual fund held 43 issues, with 11.60% of its total assets invested in Andarko Petroleum Corp.

Ivy Energy A ( IEYAX - MF report ) seeks capital appreciation over the long term. The fund invests at least 80% of its assets in securities issued by energy companies. Companies engaged in exploration, discovery, production and distribution of energy constitute the fund’s major investments. The energy mutual fund returned 7.79% over the last one year period.

The fund manager is David P. Ginther and he has managed this energy mutual fund since 2006.

Vanguard Energy Index (VENAX) invests in approximately all of the equity securities which make up its target index, the MSCI US Investable Market Energy 25/50 Index. This index is made of large, medium and small domestic companies from the energy sector. The energy mutual fund has a five year annualized return of 5.92%.

The energy mutual fund has an expense ratio of 0.19% compared to a category average of 1.64%.

Putnam Global Natural Resources A ( EBERX - MF report ) seeks capital growth. The fund primarily invests in common stocks of energy and natural resources companies across the world. It focuses on acquiring value stocks and invests in large and mid-cap companies. The energy mutual fund has a ten year annualized return of 9.75%.

The fund manager is Steven Curbow and he has managed this energy mutual fund since 2008.

To view the Zacks Rank and past performance of all energy mutual funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.