Thematic investment has been riding out the coronavirus-driven volatility waves over the past year. And some of these themes will maintain the momentum as economies around the globe try to rebound. Due to the pandemic, people had to adapt to new ways of working, shopping, and entertaining and some of their lifestyle changes are here to stay. Thus, investing in funds that have significant exposure to companies that benefit from these trends is prudent.
First on our list is
clean energy. Rise in climatic anomalies has caused severe disruptions in the supply chain globally. With climate change accelerating at an alarming rate, global economies are striving to reduce carbon emissions and go green. The power outage in Texas,which left millions without power, is an example of how severely climate change is impacting economies. Joe Biden’s election has ramped up the clean energy space, which is likelyto tread north this year. On Mar 4, the U.S. Department of Energy announced $115 million of funding for small businesses that undertake clean energy research and development projects. The funding will be provided by Biden's Build Back Better plan, which was launched on Feb 5. Embracing renewable forms of energy, such as wind and solar, helps achieve a part of the target.
Next, we have the
work-from-home technology trend. The pandemic has induced remote working trends and amplified the requirement for artificial intelligence (AI), robotics, cloud computing and cyber security. These techs helped employees access their office devices during the lockdowns and use cloud collaboration platforms to communicate with clients and colleagues. Even as the pandemic woes ease and vaccines are being made available to common people, many companies are weighing the advantages of remote working and advising employees to work from their home offices. This will keep several technology trends going this year as well.
The last on our list is
pharmaceuticals. Vaccineswill continue to boost pharma companies this year. Millions of vaccines are required for the global population and research work to obtain better and effective cure will keep this space booming. Vaccine developers like Pfizer or Moderna are sure to benefit as the industry manages to get COVID-19 under control this year, therapeutic drugs makers like Regeneron will gain big. Additionally, companies that are engaged in the distribution and logistics of the vaccines are poised to grow. 4 Funds to Buy
Given the scenario, we have shortlisted four mutual funds with significant exposure to the aforementioned themes and a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
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 Environment and Alternative Energy Portfolio ( FSLEX Quick Quote FSLEX - Free Report) aims for capital appreciation. The non-diversified fund invests majority of assets in common stocks of companies principally engaged in business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services.
This Zacks Sector – Other product has a history of positive total returns for more than 10 years. FSLEX has three and five-year return of nearly 10% and 15%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,
please click here.
FSLEX has an annual expense ratio of 0.85% versus the category average of 1.04%. Additionally, the fund has significant investment in clean energy companies like Tesla, Cummins and Linde.
Fidelity Select Technology Portfolio ( FSPTX Quick Quote FSPTX - Free Report) fund aims for capital appreciation. This non-diversified fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSPTX has returned 31.1% and 30.5% in 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.
FSPTX has an annual expense ratio of 0.71% versus the category average of 1.24%.
Fidelity Select Software & IT Services Portfolio ( FSCSX Quick Quote FSCSX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies engaged in research, design, production or distribution of products or processes that relate to software or information-based services.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSCSX has three and five-year returns of 28.1% and 26.3%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds,
please click here.
FSCSX has an annual expense ratio of 0.71% versus the category average of 1.24%.
Fidelity Select Health Care Portfolio ( FSPHX Quick Quote FSPHX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies principally engaged in the design, manufacture or sale of products or services used for or in connection with health care or medicine.
This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, FSPHX has returned 20.7% and 14.3% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,
please click here.
FSPHX has an annual expense ratio of 0.70% versus the category average of 1.18%.
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