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Play Bumper Jobs Data with These 6 Mutual Funds

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The U.S. economy posted the best two-month stretch of hiring in June and July this year, while wages also moved north. Such robust job gains renewed confidence in the U.S. economy despite long-run worries including the fall in corporate profits and retreating business outlays.

Given this rise in new jobs, investing in mutual funds exposed to the hiring sectors will be a prudent move. An increase in employment indicates that such sectors are experiencing growth trends, and will generate more income and broaden their customer base.

July Jobs Report at a Glance

For the second month in a row, the U.S. economy generated impressive jobs growth in July. According to the Bureau of Labor Statistics, payrolls climbed by 255,000 last month that exceeded analysts’ expectations, while it followed a 292,000 gain in June.  Most estimates had put job additions for July at 180,000.

This upbeat stretch of hiring from June to July has put to rest any doubt about the strength of the economy. This two-month stretch of hiring came in despite global turbulence and slowdown in business spending. The rather unusual weak jobs gain in May had raised concerns about the seven-year-old U.S. economic recovery.

July’s labor market report was exceptionally strong, with more Americans joining the labor force, keeping the unemployment rate steady at 4.9%. More than 400,000 people had joined the labor force last month. Fed officials believe that the jobless rate will average between 4.7% and 5% over the long haul. 

Wages have been increasing at a steady rate in recent times, suggesting that the job market is tightening. Hourly pay grew 0.3% to $25.69 in July, while over the year average hourly earnings increased 2.6%. This matched the strongest 12-month gain since July 2009 (read: 5 Stocks to Buy on Encouraging Employment Data).

Broad-Based Gain in Payrolls

The gain in payrolls was broad based in July, with professional and business firms leading the way and adding 70,000 jobs. Within the industry, employment rose the most in professional and technical services, mostly led by computer systems design and related services.

Leisure and hospitality beefed up staff by 45,000, while healthcare providers added 43,000 jobs, with gains primarily in ambulatory healthcare services, hospitals, and nursing and residential care facilities. Employment in financial activities rose by 18,000, while retail trade also bolstered its workforce by 14,700.

Construction too is finding its way with 14,000 jobs additions, while its unemployment rate is remarkably low at 4.5% compared with 5.5% a year ago. In fact, six years ago, the jobless rate was 20.1%. 

Separately, government agencies took in 38,000 workers, the most since September 2014. On the other hand, employment in mining continued to experience a downtrend.

6 Best Mutual Funds to Ride Robust Employment

Uptick in employment in the above-mentioned fields signifies that there are strong growth prospects. As employment hasn’t gone down, such fields aren’t positioned to face long-lasting depression or underdevelopment. In fact, such fields are expected to create new income growth and a solid base of consumers. 

Hence, it will be a judicious decision to invest in mutual funds exposed to such fields including professional services, restaurant and hotel industry, healthcare services, financial services, retail trade and construction. But, why choose mutual funds over stocks? This is because funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear (read: The Advantages Of Mutual Funds).

We have chosen six such mutual funds that possess a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive 3-year and 5-year annualized returns, minimum initial investments within $5000 and carry low expense ratios.

Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests a major portion of its assets in securities of companies engaged in design, production, or distribution of products or processes that relate to software or information-based services. FSCSX’s 3-year and 5-year annualized returns are 16.1% and 19.6%, respectively. FSCSX carries a Zacks Mutual Fund Rank #1. Annual expense ratio of 0.76% is lower than the category average of 1.51%.

Fidelity Select Leisure (FDLSX - Free Report) invests the majority of its assets in securities of companies engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX’s 3-year and 5-year annualized returns are 8.9% and 14.4%, respectively. FDLSX carries a Zacks Mutual Fund Rank #2. Annual expense ratio of 0.78% is lower than the category average of 1.37%.

Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests a large portion of its assets in securities of companies engaged in the ownership or management of hospitals, nursing homes, health maintenance organizations, and other companies specializing in the delivery of health care services. FSHCX’s 3-year and 5-year annualized returns are 14.5% and 16.6%, respectively. FSHCX carries a Zacks Mutual Fund Rank #1. Annual expense ratio of 0.77% is lower than the category average of 1.22%.

Schwab Financial Services invests in equity securities issued by companies in the financial services sector that may include asset management firms, brokerage companies, commercial banks, financial services firms, insurance companies and real estate investment trusts. SWFFX’s 3-year and 5-year annualized returns are 4.1% and 11.9%, respectively. SWFFX carries a Zacks Mutual Fund Rank #2. Annual expense ratio of 0.9% is lower than the category average of 1.46%.

Fidelity Select Retailing (FSRPX - Free Report) invests a major portion of its assets in securities of companies engaged in merchandising finished goods and services to individual consumers. FSRPX’s 3-year and 5-year annualized returns are 16.3% and 21.3%, respectively. FSRPX carries a Zacks Mutual Fund Rank #1. Annual expense ratio of 0.8% is lower than the category average of 1.37%.

Goldman Sachs Real Estate Securities A (GREAX - Free Report) invests a large portion of its assets in a portfolio of equity investments in issuers that are primarily engaged in or related to the real estate industry. GREAX’s 3-year and 5-year annualized returns are 13.3% and 14.6%, respectively. GREAX carries a Zacks Mutual Fund Rank #1. Annual expense ratio of 1.26% is lower than the category average of 1.31%.

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