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The retail sector was one of the worst hit during the peak of the pandemic, and since then it has been struggling hard to bounce back. After a roller-coaster ride in 2020, things finally seem to be changing, with retail sales now picking up.

However, there are a lot of challenges, with rising prices being one of the biggest. Despite all of these factors, people are still willing to spend as they have more disposable cash in hand now. Thus, funds like Fidelity Select Consumer Discretionary Portfolio (FSCPX - Free Report), Fidelity Select Consumer Staples Portfolio (FDFAX - Free Report), and Fidelity Select Retailing Portfolio (FSRPX - Free Report) are likely to benefit in the near-term.

Retail Sales Jump in February

The Commerce Department said on March 16 that retail sales jumped 0.3% in February. Although this is a lot slower than January’s gains of 4.9%, the good thing is that 2022 has started on a positive note for retailers, with sales jumping in the first two months of the year.

Moreover, the jump comes despite rising costs, which have made many spend more cautiously. February’s sales were primarily driven by a 5.3% jump in spending on gasoline, as energy costs continued to climb due to the ongoing Russia-Ukraine war. However, despite rising costs, people are willing to spend, suggesting that the sector is on track for faster recovery. Of the 13 retail sectors, sales grew in seven.

Also, the U.S. unemployment rate has hit a low of 3.8%, which shows that people are finally going back to work. This means people are earning more now and are likely to spend in the coming days. Moreover, disposable income has been rising almost throughout the pandemic. Also, household savings hit a new high in 2021, signaling that consumer spending will rise in the next months.

3 Best Choices

We have therefore 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 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 (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

The Fidelity Select Consumer Discretionary Portfolio fund aims for capital appreciation. FSCPX invests the majority of its assets in securities of companies typically engaged in production, distribution, and marketing of consumer discretionary products. The Fidelity Select Consumer Discretionary Portfolio fund invests in both U.S. and non-U.S. issuers.

The Fidelity Select Consumer Discretionary Portfolio has a history of positive total returns for more than 10 years. Specifically, FSCPX has returned 17.4% and 15.8% 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.

FSCPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76% versus the category average of 0.79%.

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

The Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 13.9% and 7.8% 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 0.75% versus the category average of 0.76%.

The 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.

The Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 19.1% and nearly 18.4% 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%.