Per the latest report from the Institute of Supply Management (ISM), service activity for the month of March surged for the 10th month on the trot, indicating that the broader economy is on track for steady growth this year. Notably, all of the 18 non-manufacturing industries reported expansion.

Needless to say, the service sector picked up on the back of governments lifting business restrictions and increasing vaccinations. Under such circumstances, investing in mutual funds having significant exposure to services-related companies may prove to be prudent.

Spur in Business Activity and New Orders Boosted the Metric

The Institute of Supply Management reported on Mar 5 that its service index came in at 63.7% in March, surpassing the previous month’s reading of 55.3%. Experts opined that easing restrictions and a rise in vaccinations have been pivotal in boosting the large service side of the U.S. economy.

A reading above 50 indicates expansion in the sector. And a reading above 55% is considered phenomenal. Further, an uptick in the business activity in March also supported growth for the service sector.

The Business Activity Index registered an all-time high of 69.4% in March to report growth in business activity for the 10th consecutive month. This is the highest reading for the index since 1997. Notably, 17 of the surveyed industries reported an increase in business activity for the month.

Looking at other positive developments from the report, the non-manufacturing New Orders Index surged to 67.2%. This represents growth for 10 straight months that too at an accelerated rate when compared with February. Finally, the non-manufacturing Employment Index surged to 57.2%, expanding for the third straight month.

4 Best Choices

We have, thus, selected four service related mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such 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 Health Care Services Portfolio (FSHCX Quick QuoteFSHCX - Free Report) fund invests a large chunk of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.

This Sector – Health product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 16.1% over the past five years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSHCX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.75%, which is below the category average of 1.21%.

Fidelity Select Banking Portfolio (FSRBX Quick QuoteFSRBX - Free Report) fund seeks appreciation of capital. FSRBX normally invests at least 80% of assets in common stocks of companies principally involved in banking. The fund invests in both U.S. and non-U.S. companies.

This Sector-Finance product has a history of positive total returns for over 10 years. Specifically, the fund has returned 6.8% over the past five years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRBX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.34%.

Fidelity Select Leisure Portfolio (FDLSX Quick QuoteFDLSX - Free Report) fund invests a bulk of its assets in securities of companies engaged in the design, production or distribution of goods or services in the leisure and recreation industries. The fund seeks growth of capital and invests both in U.S. and non-U.S. companies.

This Sector – Other product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 15.8% over the past five years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

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

T. Rowe Price Financial Services (PRISX Quick QuotePRISX - Free Report) fund seeks both capital growth and current income. The majority of its assets are invested in financial services sector companies. It may also purchase securities of companies involved in providing financial software. The fund uses fundamental bottom-up analysis in order to select securities.

This Sector – Finance product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 15.8% over the past five years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

PRISX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.89%, which is below the category average of 1.34%.

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