Frequent new developments in the ongoing trade dispute between the United States and China have rattled the markets. Mutual fund investors who seek immunity from such turbulence can opt for stable investments, by purchasing mutual funds having significant exposure to consumer staples.

Possibility of No U.S.-China Trade Deal in 2019

Per a Reuters report on Nov 20, completion of the much-anticipated “phase one” of the trade agreement between the United States and China could potentially shift to 2020.. According to the news agency, a deal might be delayed because China is pushing for more relief from tariffs and the Trump administration is pressing the Asian country with more demands.

On Nov 21, China’s Ministry of Commerce spokesman Gao Feng said at a regular press conference that Beijing was willing to work together to properly settle areas of common concern and that the country would strive for a phase-one trade agreement.

Gao also dismissed “external rumors” about the trade talks and said that the two countries remain in close communication on trade. China is demanding that the U.S. cancel all tariffs as part of the final trade deal, America would like the Asian country to buy more U.S. agricultural products.

In addition, President Donald Trump indicated that he may not agree to roll back tariffs as part of the first phase of the deal. He even threatened higher tariffs on China (to be effective from Dec 15) in case there is no progress in trade negotiations.

Why Invest in Consumer Staples?

The aforementioned factors have made the current trade deal scenario rather uncertain for investors to access. It is, therefore, prudent to invest in a defensive sector such as consumer staples at present because of the nature of the products they offer.

These companies have stable earnings irrespective of volatile market conditions or business cycle as they offer products of basic necessity to consumers. Therefore, demand for these products is affected the least when consumers cut back on their spending.

Our Choices

We have, therefore, selected two top mutual funds that invest in consumer staples. Both these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date returns. In addition, the minimum initial investment is within $5,000.

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 of the 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.

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

This Zacks sector – Other product has a history of positive total returns for more than 10 years.

The Fidelity Select Consumer Staples Portfolio allocates its assets in the top two major groups — Foreign Bond and Large Value. Further, as of May 31, 2019, The Coca-Cola Company, The Procter & Gamble Company and Philip Morris International were the top holdings for FDFAX.

FDFAX has an annual expense ratio of 0.77%, which is below the category average of 1.20%. It has returned 25.7% on a year-to-date basis. FDFAX has no minimum initial investment.

Fidelity Advisor Consumer Staples Fund Class A (FDAGX - Free Report) invests the majority of its assets in securities of companies that produce and sell consumer staples products. The fund is non-diversified and seeks capital appreciation through its investments. FDAGX invests in both American and foreign issuers.

This Zacks sector – Other product has a history of positive total returns for more than 10 years.

The Fidelity Advisor Consumer Staples Fund Class A allocates its assets in the top two major groups — Foreign Bond and Large Value. Further, as of May 31, 2019, The Coca-Cola Company, The Procter & Gamble Company and Philip Morris International were the top holdings for FDAGX.

FDAGX has an annual expense ratio of 1.05%, which is below the category average of 1.20%. It has returned 25.4% on a year-to-date basis. FDAGX has no minimum initial investment.