The retail sector is facing quite a few challenges, with rising prices slowing sales. However, a successful back-to-school season has made retailers optimistic about the upcoming holiday season. Retail sales are projected to grow during the holiday season, which is definitely good news for retailers.

Moreover, higher demand for goods is still driving sales, helping the retail sector amid soaring inflation. Thus, funds like Fidelity Select Retailing Portfolio (FSRPX Quick QuoteFSRPX - Free Report) , Fidelity Select Consumer Staples Portfolio (FDIGX Quick QuoteFDIGX - Free Report) and Fidelity Select Consumer Staples Portfolio (FDFAX Quick QuoteFDFAX - Free Report) are likely to benefit in the near term.

Holiday Sales Projected to Jump

The holiday season is expected to begin a bit early this year. Analysts have predicted that a number of big retailers are going to announce discounts and deals earlier this year. The holiday season begins on Nov 1 and ends on Dec 31.

According to a report from Deloitte, holiday season sales are projected to rise 4-6% in 2022. Moreover, online sales are predicted to climb 12.8-14.3% during the 2022-2023 holiday season.

E-commerce has been playing an important role in driving retail sales for the past few years. This year too won’t be any different. The pandemic saw more people shopping online, which has now become a habit. Moreover, e-commerce has been playing an important role in giving holiday sales a boost.

According to a separate report from Adobe, online sales during this holiday season are projected to reach $209.7 billion, suggesting an increase of 2.5% year over year. The report also mentions that during Cyber Week, which spans from Thanksgiving Day through Cyber Monday, online sales are expected to soar to $34.8 billion, up 2.8% from the previous year. This would make up 16.3% of the overall e-commerce sales during the holiday season.

Also, Black Friday e-commerce sales are expected to grow 1% to $9 billion on a year-over-year basis.

The success of back-to-school shopping is another indication that retail sales are likely to get a major boost during the upcoming holiday season.

The holiday season is a crucial window for merchants since sales increase significantly during this time. However, this year has been quite difficult for retailers. Spending has slowed as a result of inflation reaching a 40-year high. Retail sales have slowed because consumers are being very cautious with their money.

Even then, the retail industry is struggling to overcome the challenges, with higher demand for goods still helping to drive sales.

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 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 6.2% and nearly 11.6% 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.

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%.

Fidelity Select Consumer Staples Portfolio fund aims at capital appreciation. FDIGX invests its assets in the common stock of companies engaged in the manufacture, sale, or distribution of consumer staples.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDIGX has returned nearly 5.3% and nearly 5% 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.

FDIGX 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 aims for capital growth. FDFAX invests the majority of assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.

Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 5.4% and 5% 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.

FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0% versus the category average of 0.76%.

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