Retailers bank heavily on the holiday shopping season, and this year isn’t going to be any different. Although inflation continues to be a concern as high prices are making consumers cautious, spending is projected to grow this holiday season.

According to the National Retail Federation (NRF), holiday sales are projected to grow 3-4% to $957.3-$966.6 billion this year. Sales from online and other non-store channels are expected to grow 7% to 9%, reaching a total of $273.7 billion to $278.8 billion.

Retail sales declined marginally by 0.1% in October but that was the first time in the past seven months. Experts believe that the unexpected decline in October was primarily because consumers tried to save more to splurge during the holiday season.

Moreover, the travel and leisure sector is also likely to benefit from the holiday season as an increasing number of Americans plan to go on trips. The Transportation Security Administration said that 30 million passengers are expected to go through the screen between Nov 17 and Nov 28, hitting a record high.

The Sunday following Thanksgiving is expected to be the busiest day within this timeframe, with approximately 2.9 million passengers projected to travel by air.

According to a Deloitte survey, around 48% of Americans plan to travel between Thanksgiving and mid-January compared to 31% in 2022. Among these, 56% plan to stay in hotels.

Understandably, the post-pandemic boom is going to continue into this year’s holiday season.

Also, interest rates, despite being at a multi-decade high, have remained stable for a while as the Federal Reserve has decided to keep its benchmark policy rate unchanged in the range of 5.25-5.5%.

This has raised expectations that the Federal Reserve may be done with its monetary tightening campaign and will likely keep interest rates unchanged in its December FOMC meeting also.

3 Best Choices

We have selected three mutual funds with significant exposure to the retail and discretionary sectors. The funds carry either 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 in identifying 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 (FSRPX Quick QuoteFSRPX - Free Report) 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 fund has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 3.1% and 9.5% over the past three and five-year periods, respectively. Fidelity Select Retailing Portfolio fund has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.72%, which is below the category average of 0.79%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Consumer DiscretionaryPortfolio (FSCPX Quick QuoteFSCPX - Free Report) fund invests the majority of its assets in common stocks of companies principally engaged in the manufacture or distribution of consumer discretionaries. FSCPX uses the fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.

Fidelity Select Consumer Discretionary Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned nearly 2.7% and 8.1% over the past three and five-year periods, respectively. Fidelity Select Consumer Discretionary Portfolio fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 0.79%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Leisure Portfolio (FDLSX Quick QuoteFDLSX - Free Report) fund invests the majority of its assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.

Fidelity Select Leisure & Entertainment fund has a history of positive total returns for more than 10 years. Specifically, FDLSX has returned nearly 11.9% and 10.9% over the past three and five-year periods, respectively. FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.74%, which is below the category average of 0.79%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

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