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3 Funds to Buy Ahead of a Promising Holiday Season

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The retail sector has been facing a tough time amid soaring inflation. Rising costs have compelled people to spend cautiously. However, the retail sector has managed to survive this and sales have been growing owing to higher demand for consumer goods.

So far, retail sales have grown in six out of the first eight months of the year, which shows that consumers are still willing to spend. Thus, funds like Fidelity Advisor Consumer Staples Fund Class A (FDAGX - Free Report) , Fidelity Select Consumer Staples Portfolio (FDCGX - Free Report) and Fidelity Select Retailing Portfolio (FSRPX - Free Report) are likely to benefit in the near term.

Retail Sales Jump in August

The Commerce Department said on Aug 15 that retail sales rose 0.3% month over month in August to hit $683.3 billion. August’s unexpected jump amid pressures of rising costs comes after July’s sales were downwardly revised to a decline of 0.4%.

On a year-over-year basis, retail sales jumped 9.1% in August. One of the main reasons behind the jump in August sales was a decline in energy costs. This sparked a 2.8% increase in sales of motor vehicles and auto parts in August.

Even though the jump in August was marginal, it came at a time when the economy was under pressure due to inflation. People are being forced to spend cautiously and are primarily spending on basics as a result of rising costs.

The government said that consumer price index-based inflation increased 8.3% annually in August but retail sales increased 9.3%, indicating that prices were surpassed by purchases.

Retail sales in August were also boosted by back-to-school buying.

The jump in August sales is likely to encourage retailers ahead of the holiday season. Holiday retail sales, excluding vehicles, are anticipated to increase 7.1% year over year in 2022, according to Mastercard SpendingPulse.

According to analysts, a number of companies intend to kick off the holiday shopping season in October in order to boost sales.

According to a separate report from Deloitte's annual holiday retail forecast, holiday sales are expected to increase between 4% and 6%. Deloitte expects that during the 2022–2023 holiday season, online sales will increase 12.8%–14.3% from the previous year.

3 Best Choices

We have selected three mutual funds with significant exposure to the retail sector that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above 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 fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also 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 Advisor Consumer Staples Fund Class A aims for capital growth. FDAGX invests the majority of its assets in securities of companies that manufacture and market consumer staples products. Fidelity Advisor Consumer Staples Fund Class A primarily invests in common stocks of companies.

Fidelity Advisor Consumer Staples Fund Class A has a history of positive total returns for more than 10 years. Specifically, FDAGX has returned nearly 9% and 6.4% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDAGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0%, which is below the category average of 0.76%.

Fidelity Select Consumer Staples Portfolio fund invests the majority of its assets in securities of companies whose primary business is the production, sale, or distribution of consumer goods. FDCGX makes investments in both domestic and overseas issuers.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDCGX has returned nearly 8.2% and 5.6% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDCGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0%, which is below the category average of 0.76%.

Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 9.2% and nearly 14% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.

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