Per the latest report by the Federal Reserve, industrial production rebounded in the month of June. This followed a steep decline the metric experienced in May. Gains were buoyed by a steady increase in manufacturing and mining output. Such an increase also raised second-quarter GDP estimates to as high as 5.2%, more than double the rate in the first quarter.

Fed Chair Jerome Powell made positive comments about the state of the economy in his latest testimony before the congress. Under such circumstances, investing in mutual funds having significant exposure to the manufacturing and industrial companies seems prudent.

US Industrial Production Grows for three straight quarters

Industrial production in the United States increased 0.6% for the month of June and 6% year over year in the second quarter. This also marked its third consecutive quarterly increase. Further, manufacturing output increased steadily by 0.8% in the month and 1.9% over the second quarter.

Strong industrial production figures indicate the strength in the U.S. economy. Moreover, manufacturing accounts for about 12% of the U.S. economy and any increase in the metric suggests that the economy is burgeoning.

Factors Supporting the Growth

A steady increase in production of automobiles and auto ancillary parts contributed to much of the gains last month. This metric increased 7.8%, rebounding from an 8.6% decline in May caused by a fire, which drastically affected the assembly of trucks. Notably, manufacturing output excluding automobiles increased only 0.3% in June.

Mining output increased by 1.2% to hit a new all-time high. This represents the fifth straight month of gains for the metric. The index also increased by a little over 19% in the second quarter.

4 Best Funds to Buy Now

Given such positives, we have highlighted four mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and one-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.

Fidelity Select Industrials Fund (FCYIX - Free Report) seeks capital appreciation. FCYIX normally invests a large portion of its assets in the common stock of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.5% over the three-year and 11.2% over the five-year benchmarks. 

FCYIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.04%.

Fidelity Select Automotive Port (FSAVX - Free Report) seeks capital appreciation. This fund invests the majority of its assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires and related services.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 3.5% over the three-year and 7.5% over the five-year benchmarks. 

FSAVX has a Zacks Rank #2 and an annual expense ratio of 0.96%, which is below the category average of 1.17%.

Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) invests a huge portion of its assets in securities of companies involved primarily in the research, manufacture, and sale of products and services as per the defense or aerospace industries. The fund seeks capital growth by investing in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 18.7% over the three-year and 17.4 over the five-year benchmarks. 

FSDAX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.04%.

Fidelity Select Transportation (FSRFX - Free Report) seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in design, manufacture, and sale of transportation equipment and provide transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 11.8% and 14.8% over the three-year and five-year benchmarks, respectively. 

FSRFX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.04%.