3 Solid Funds to Buy on Steady Growth in Retail Sales

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The retail sector has continued to grow despite inflationary pressures that are making people spend cautiously. So far, retail sales have grown in five out of the first six months of the year, indicating that the sector is still going strong.

One of the main reasons behind this steady growth is the surging prices of consumer products. However, higher demand for commodities is also driving sales. Thus, funds like Fidelity Select Consumer Staples Portfolio FDIGX, Fidelity Select Retailing Portfolio FSRPX and Fidelity Select Consumer Staples Portfolio FDFAX are likely to benefit in the near term.

Retail Sales Grow in June

According to the latest report from the Commerce Department, retail sales grew a 1% in June, beating expectations of a rise of 0.9%. This follows a slight drop in sales in May. However, May’s results were revised from the previously reported 0.3% decline to a decline of 0.1%.

According to the data, sales increased in a number of categories in June. Increasing food and gas prices were also attributed to some of the increases. But, in June, the retail industry made a strong rebound.

Retail sales, excluding vehicles, increased by 1%, which came in above the forecast of a 7% increase. According to the report, there were several sales as individuals spent money at restaurants and on furnishings and automobiles.

Vehicle sales increased by 0.9% in June. Sales at petrol stations increased by 3.6%, which significantly boosted overall sales. Sales at pubs and restaurants increased by 1%.

Although June’s inflation rate hit a 41-year high, consumer demand for products has been soaring over the months. Customers have been spending cautiously, but higher food prices are making them spend more, which is helping sales. Nevertheless, increased retail sales show that they have resisted the pressure of inflation.

In order to keep inflation under control, the Fed increased interest rates by another 75 basis points earlier this week. Additional rate increases are anticipated in the near future. However, consumers have been able to spend freely up to this point because of increased money from higher earnings.

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 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 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 9.3% and nearly 5.9% 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 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 6.3% and nearly 11.5% 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.

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 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 9.3% and 5.9% 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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