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Inflation has picked up dramatically so far this year. In fact, Americans are spending much more on items than they used to in 2020. Rapid vaccination, easing of restrictions and fiscal stimulus have brought the economy to the path of recovery from the pandemic, which has boosted demand. However, perked-up demand versus supply chain constraints is leading to a rise in inflation and threatening to affect consumer spending.

Per the Labor Department’s report on Oct 13, the consumer price index jumped 0.4% in September, a 5.4% rise over the last 12 months and matching the largest increase since 2008. This 13-year high inflation was pushed by an upward trend in the cost of food, a 4.6% rise in the last month and the highest since December of 2011. Cost of shelter has gone up 3.2%, while automobile and energy costs are up 8.7% and 24.8%, respectively.

Items, namely apparel, furniture, hotel rooms, new and used cars, and food and energy, have witnessed a rise in cost as the highly contagious Delta variant of coronavirus continues to hamper factory operations and slow down production. Automobile prices, especially the cost of new cars, continue to rise due to the shortage of semiconductors and supply chain disruptions. Crude oil prices remain elevated due to the shortage of natural gas, which in turn pushed demand for other energy sources and ultimately pushed oil prices higher. Gas prices have jumped 42% over the past year and coal prices continue to hover near-record high.

4 Mutual Fund Picks

Given the current scenario and the uptick in inflation, investors should consider safe-haven options like Real Estate Investment Trust (REIT), gold, and utilities, which stand a better chance during this downturn. While these safe-haven options lag in gains compared to cyclical sectors, including energy and REIT, they offer better safety than technology and other growth stocks in present times.

Hence, we have shortlisted four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform 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 the likely future success of the fund.

The question here is why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds.

Fidelity Select Utilities Portfolio (FSUTX - Free Report) aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies primarily engaged in the utilities industry and companies generating most of their revenues from utility operations.

This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 7.6% and 10.1% in the past three and five-year period, respectively. 

FSUTX has an annual expense ratio of 0.76%, below the category average of 0.94%.

Franklin Gold and Precious Metals Fund Class A (FKRCX - Free Report) aims for capital appreciation and current income is a secondary consideration. This non-diversified fund invests most assets in securities of gold and precious metals operation companies located globally.

This Zacks sector - Precious Metal product has a history of positive total returns for more than 10 years. Specifically, FKRCX has returned 24.1% and 3% over the past three and five-year periods, respectively. 

FKRCX has an annual expense ratio of 0.93%, below the category average of 1.17%.

Fidelity Real Estate Investment Portfolio (FRESX - Free Report) fund aims for above-average income and long-term capital growth, consistent with reasonable investment risk. This non-diversified fund invests primarily in common stocks. The majority of FRESX’s assets are invested in securities of companies principally engaged in the real estate industry and other real estate-related investments.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, FRESX has returned 9.9% and 6.6% over the past three and five years, respectively.

FRESX has an annual expense ratio of 0.74% versus the category average of 1.08%.

Calvert Global Energy Solutions Fund Class A (CGAEX - Free Report) aims to track the performance of the Calvert Global Energy Research Index. The fund invests a majority of assets in companies whose primary business is sustainable energy solutions. The portfolio consists of companies engaged in facilitating the transition to a more sustainable economy by reducing greenhouse gas emissions and the expanded use of renewable energy sources.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. CGAEX has three and five-year returns of 23.8% and 16.8%, respectively.

CGAEX has an annual expense ratio of 1.24%, below the category average of 1.26%.