2 Mutual Funds to Buy Ahead of the Holiday Season – November 20, 2018

A robust labor market, steadily rising wages and strong household finances have resulted in a surge in household spending across the United States. Further, clothing remains the preferred gift item ahead of what is expected to be a record-breaking holiday shopping season.

Even though consumer spending showed signs of cooling last month, industry experts believe that overall spending would cross the $1 trillion mark this season. By the way, U.S. retail sales have already gathered steam in October. Under such encouraging conditions, it makes buying mutual funds that invest in leisure, discretionary and transportation companies prudent.

Holiday Season to Shatter Records

Per a report published on Nov 5 by leading market research firm eMarketer, Americans are likely to spend more than $1 trillion this holiday season. The report states that consumers in the United States would spend approximately $1.002 trillion from Nov 1 through Dec 31 this year.

Further, the report estimates that e-commerce sales would surge 16.6% to $123.73 billion, representing about 12.3% of the total retail sales this holiday season and would be the primary catalyst for growth in retail sales. Notably, though brick-and-mortar retailers still eat up approximately 87.7% of the pie.

Meanwhile, traditional retailers are continuously trying to up their game. Retail giant Target has already released its Black Friday ad for 2018. Online retailers are not far behind in the game. Amazon announced on Nov 5 that all its members from the United States and not only Prime members would be eligible for free shipping this holiday season.

Consumers Spend Generously

Per the Commerce Department’s GDP data released on Oct 26, consumer spending on clothing and footwear rose 11.7% year over year last quarter. This marked its biggest increase since 2005. Moreover, this helped in boosting consumption of non-durable goods to its fastest pace in about five years. Notably, apparel spending accounts for about 3% of consumer spending.

Further, the National Retail Federation (NRF) forecast on Oct 3 that retail sales in the months of November and December would grow by 4.8% from 2017. This estimate also beats the five-year average of 3.9% for the period. Notably, U.S. retail sales rose sharply at the pace of 0.8% in October.

Notably, Adobe Analytics reported that U.S. consumers spent $18.1 billion online in the first 12 days of November. Earlier this month, Adobe had also predicted that online sales would touch $124 billion this holiday season.

2 Best Funds to Buy Now

Given such circumstances, we have highlighted two mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to gain from such 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).

Fidelity Select Leisure Fund (FDLSX Free Report) seeks capital appreciation. FDLSX normally invests at least 80% of its assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. The fund offers dividends and capital gains twice a year in April and December.

This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 8.1% over the three-year and 9.4% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here

The Fidelity Select Leisure Fund, managed by Fidelity, carries an expense ratio of 0.77%.  Moreover, FDLSX requires a minimal initial investment of $2,500.

FDLSX’s performance, as of the last filing, when compared to funds in its category was in the top 16% over the past three years and in the 8% over the past five years.

Fidelity Select Consumer Discretionary Portfolio Fund (FSCPX Free Report) invests in large-blend companies. The objective of FSCPX is to seek capital appreciation. FSCPX normally invests at least 80% of its assets in common stocks of companies principally engaged in the manufacture and distribution of goods and services to both domestic and international consumers.

This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 9.3% and 10.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here

The Fidelity Select Consumer Discretionary Portfolio Fund, managed by Fidelity, carries an expense ratio of 0.77%.  Moreover, FSCPX requires a minimal initial investment of $2,500.

FSCPX’s performance, as of the last filing, when compared to funds in its category was in the top 10% over the past three years and in the 7% over the past five years.

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