Climatic change has become one of the prime focuses of economies globally. In the United States, President Joe Biden has emphasized on making America carbon neutral by 2050 and this gives the electric vehicle (EV) space huge scope for growth. After reaping heavy benefits in 2020, the EV market is already looking more promising and profitable this year. From EV producers and battery makers, to companies building charging infrastructure, all will gain as consumers dump carbon-based fuel run vehicles for EVs.

Per a Morgan Stanley report, global EV sales are estimated to grow 50% or more in 2021. In fact, the American EV market is poised to sell 6.9 million units by 2025, which will definitely overshadow the 1.4-million units estimated to be sold in 2020.

Factors driving growth of EVs are increased environmental awareness, the shift from gasoline-powered vehicles to EVs, support from favorable government policies and financial aids in terms of subsidies and grants. Additionally, decline in cost of battery prices and advancement in technology has been a boon for the EV market. Price of Lithium-ion battery packs has declined more than 80% in the last 10 years, which has also led to the decline in cost of electric cars.

Coming to government policies, Biden has made it a centerpiece of his presidential plan to combat climate change and support several rebate programs. The Car Allowance Rebate System (CARS) program provides a credit of up to $4,500 to Americans who will trade their older vehicles for new EVs. Also, consumers can get a federal tax credit of up to $7,500 on purchase of an all-electric or plug-in hybrid EV.

Apart from fiscal aids, the government is spending millions to promote the EV market. For instance, Biden aims to spend $400 billion on clean energy infra, including battery technologies and EVs, with a target to put up 500,000 new electric vehicle charging outlets by the end of 2030.

3 Winning Funds

Given the current shift to electric vehicles and its strong growth prospects, we have shortlisted three funds that hold a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (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 QuoteFSLEX - 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 10.9% and 16.4%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSLEX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.85% versus the category average of 1.04%. Additionally, the fund has significant investment in companies that deal in electric vehicles or related products and services like Tesla, Microsoft, and Cummins.

Fidelity Select Technology Portfolio (FSPTX Quick QuoteFSPTX - 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 a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.71% versus the category average of 1.24%. Additionally, the fund has significant investment in companies that deal in electric vehicles or related products and services like Microsoft, NVIDIA, and SolarEdge Technologies.

Fidelity Select Automotive Portfolio (FSAVX Quick QuoteFSAVX - Free Report) fund aims for capital appreciation. This non-diversified 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.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 20.5% and 20.9% 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 #2 and an annual expense ratio of 1.00%, which is below the category average of 1.22%. Additionally, the fund has significant investment in companies that deal in electric vehicles or related products and services like Tesla, Nio, Ford and General Motors.

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