For investors looking to park their funds in the real estate sector, mutual funds are the cheapest and most convenient method. This category of funds also offers superior protection against inflation. The real estate sector has seen tough times recently but the presence of these investments generally adds stability to a portfolio. This is because the volatility in property prices is far less compared to the kind experienced by stocks. Adding such funds to a widely diversified portfolio would increase returns while reducing the associated risk significantly.

Below we share with you three best-rated real estate mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

Fidelity Real Estate Investment Portfolio (FRESX - Free Report) seeks long-term appreciation of capital and income. FRESX invests a bulk of its assets in securities of companies, which are involved in the real estate sector. The fund invests both in U.S. and non-U.S. companies. Fidelity Real Estate Investment Portfolio has a three-year annualized return of 10.5%.

Steve Buller is the asset manager of FRESX since Dec 1997.

PIMCO Real Estate Real Return Strategy C (PETCX - Free Report) invests in real estate-linked derivatives and a basket of inflation-indexed securities to achieve its investment objective. PETCX seeks to provide maximum real return. The fund also invests in Fixed Income Instruments including bonds and debt instruments issued by domestic or foreign public and private sector entities. PIMCO Real Estate Real Return Strategy C has a three-year annualized return of 10.2%.

As of September 2016, PETCX held 459 issues, with 37.42% of its total assets invested in US Treasury Note

Nuveen Real Estate Securities A (FREAX - Free Report) seeks growth of income and capital for the long run. FREAX invests the lion’s share of its assets in income generating securities of companies involved in the real estate industry. The fund aims to invest mainly in equity REITs, but may also invest in all the three types of REITs. Nuveen Real Estate Securities A has a three-year annualized return of 9.4%.

Jay Rosenberg is one of the portfolio managers of FREAX since May 2005.