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3 Mutual Funds to Gain as Consumer Sentiment Perks Up

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On Dec 11, the University of Michigan reported that its preliminary reading for index of consumer sentiment for December climbed to 81.4 (in the two weeks ending Dec 9) from 76.9 in November. The consumer sentiment index hit the highest mark in February this year at 101, however, the pandemic weighed on sentiments and pulled the index down to 71.8 in April, its lowest this year.

The report also states that a sub-index measuring consumer expectations jumped to 74.7 from 70.5 in November, while the one that measures how Americans view current economic conditions increased to 91.8 from 87.

Looking ahead into the last month of the year and with a hope that a vaccine will be available soon, consumer sentiments have lifted and the University of Michigan index of consumer sentiment, which was expected to drop to 76, has now rebounded. Prospects for the consumer discretionary sector seem bright in such a scenario, with consumers expected to go back to normal shopping and celebrations although they need to adhere to social-distancing norms.

Along with that, in the initial months of the coronavirus outbreak, lockdown measures had prevented consumers from spending. This in turn has led to the creation of plenty of cash pool for discretionary purchases. Many of them have given up travelling plans this holiday and that amount can easily be directed toward discretionary buying. This pent-up demand and an increase in social activities could boost the consumer discretionary sector immensely. Per a CNBC article, a Morgan Stanley report estimated that “U.S. households have saved an extra $1.1 trillion as of August, compared to pre-pandemic levels.”

 

3 Funds to Buy

American consumers hold a positive outlook for the economy and given such scenario, we have shortlisted three funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to grow. In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform 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 Retailing Portfolio (FSRPX - Free Report) aims for capital appreciation. This non-diversified fund invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

This Sector - Other product has a history of positive total returns for over 10 years. FSRPX has returned 20.9% and nearly 16% 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.

FSRPX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.74%, which is below the category average of 1.22%.

Fidelity Select Automotive Portfolio (FSAVX - Free Report) fund aims for capital appreciation. The fund invests majority of assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires and related services.FSAVX is a non-diversified fund.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 12.6% and 10.2% 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.

FSAVX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.00%, which is below the category average of 1.22%.

Fidelity Select Leisure Portfolio (FDLSX - Free Report) aims for capital appreciation. This non-diversified fund normally invests majority of its assets in common stocks of companies that are mostly engaged in the design, production, or distribution of goods or services in the leisure industries.

This Zacks Sector – Other has a history of positive total returns for more than 10 years. FDLSX has returned 6.9% and 8.7% 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.

FDLSX has an annual expense ratio of 0.76%, which is below the category average of 1.22%. The fund carries a Zacks Mutual Fund Rank #2.

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