3 Mutual Funds To Ride The Surge In Consumer Spending

Consumer spending rose to a six-year high, with leisure goods accounting for most of the purchases. Further, moderate levels of inflation, increase in stock prices and an upbeat labor market have also given a boost to spending on consumer discretionary goods.

Robust economic conditions and near full-employment propelled consumers’ confidence to near an all-time high in January. Further, such confidence underpins the purchasing power of a consumer and boosts economic growth. Such encouraging economic conditions calls for building positions in mutual funds invested in leisure, discretionary and transportation stocks.

Consumer Spending at a 6-Year High

Consumer spending in the United States surged to its highest level since 2011 in December. The measure of household spending rallied 0.4% last month. However, such a surge took a toll on individual savings because consumers paid for their purchases using the savings. The savings rate declined to its lowest levels in 12 years to 2.4%. Survey also showed that consumers spent heavily on leisure goods such as new cars and trucks.

The last three months of 2017 witnessed a surge in the propensity to spend by an average American, hitting its fastest pace of growth in as many as two years. Moreover, the unemployment rate, which is at 4.1% and an overall burgeoning economy also boosted consumer spending. The trend of increase in spending on leisure goods also mean that Americans would spend more on traveling, which will have a positive impact on transportation stocks.

Consumer Confidence Lingering Near its 17-Year High

Consumer confidence rose to a near 17-year high in January to 125.4, higher than the consensus estimate of 122.5. The index measures the confidence that an average American has on the current economic scenario and their outlook of the same in the next six months. Such a surge follows a decline in December.

Robust economic conditions and near full-employment pushed up the confidence level. This further strengthens the purchasing power of a consumer and helps support economic growth.

3 Mutual Funds to Buy Now

Given such positives, we have highlighted three funds having significant exposure on leisure, discretionary and transportation companies. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Leisure Fund FDLSX seeks capital appreciation. FDLSX normally invests at least 80% of 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's returns are over the three and five-year benchmarks are 10.9% and 12.6%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

The Fidelity Select Leisure fund, as of the last filing, allocates their assets in top two major groups; Foreign Bond and Large Growth.

FDLSX has a Zacks Rank #1 and an annual expense ratio of 0.79%, which is below the category average of 1.35%. The fund has three and one-year returns of 14% and 32.7%, respectively.

Fidelity Select Transportation FSRFX seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in the 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 7.8% over the three-year and 20% 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 Transportation fund, as of the last filing, allocates their assets in Large Value stocks.

FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.82%, which is below the category average of 1.27%. The fund has three and one-year returns of 10.9% and 20.8%, respectively.

Fidelity Select Consumer Discretionary Portfolio Fund FSCPX 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 has returned 10.3% over the three-year and 15.9% 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 Consumer Discretionary Portfolio fund, as of the last filing, allocates their fund in top two major groups; Large Growth and Large Value.

FSCPX has a Zacks Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.35%. The fund has three and one-year returns of 14.9% and 29.4%, respectively.

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