Investment Themes to Play Heading Into 2022: 4 Fund Picks

The year 2021 has been a roller coaster ride, with the pandemic still disrupting economies, leading to supply-chain bottlenecks, labor shortage and stagflation. Investors had to scout better investment vehicles as the low interest rates made traditional avenues less attractive. However, 2021 was more inclined toward the macro theme of the reopening of the global economy, while 2022 will continue to piggy back on it. This is because with the Delta and Omicron variants still ragging havoc and pushing administration to enforce restrictions, record-high inflation, supply-chain hurdles and labor supply shortages may impact the economic and financial market’s growth.

Let’s discuss three themes heading into 2022 that investors pick for the upcoming year. As investors consider these themes, they can pick the following mutual funds– Fidelity Select Biotechnology Portfolio FBIOX, Calvert Equity Fund Class A CSIEX, New Alternatives Fund Class A NALFX and Parnassus Mid Cap Growth Fund - Investor PARNX.

The first theme we can maintain our focus on for next year is clean energy transition. President Joe Biden’s plan to make America achieve net-zero greenhouse gas emissions by no later than 2050 will push renewables, battery technology and more. Biden’s plan includes 100% of the federal government’s electricity to be generated through carbon pollution-free means by 2030. Also by 2035, all new vehicle purchases must be zero-carbon emission cars and trucks.

Next, the boom in the biotech space will continue because of the ongoing pandemic that is boosting research for vaccines and cures and other branches like gene therapy and gene editing to fight cancer and other chronic diseases. Per a Grand View Research report, the global biotechnology market was valued at $752.88 billion in 2020 and is expected to see a CAGR of 15.83% from 2021 to 2028. In fact, government initiatives in modernizing the drug regulatory pathway and standardizing clinical studies, and growing demand for orphan drugs and personalized medicine will continue to boost this space.

Lastly, impact investing, which had a global market valued at $255.1 billion in 2020, per Research and Markets data, will reach $791.2 billion by 2027, at a CAGR of 17.6%. The pandemic has helped investors focus more on socially responsible impact investing, helping environmental, social, and governance (ESG) funds to gain prominence. Impact investing securities have outperformed the broader market over the past year and have an overall asset under management of $4 trillion. Impact investing is also not restricted to environmental or climate concerns. Corporates’ impact on the surrounding community, role in developing the said community and creation of a better value chain for the society are the other social causes it focuses on.

4 Funds to Buy

With strong prospects for 2022, we have shortlisted four mutual funds that have a significant investment in the aforementioned themes and carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.

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 (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Biotechnology Portfolio fund aims for capital appreciation. This non-diversified fund invests most net assets in common stocks of companies mostly engaged in researching, developing, and distributing biotechnological products.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 13.7% and 12.4% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Biotechnology Portfolio, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.70%, below the category average of 1.03%.

Calvert Equity Fund Class A aims for capital growth through investment in stocks believed to offer opportunities for potential capital appreciation. The fund invests most assets in common stocks of companies that rank among the top 1,000 U.S.-listed companies.

This Zacks Large Cap Growth product has a history of positive total returns for more than 10 years. Specifically, Calvert Equity Fund Class A has a three and five-year returns of 24.5% and 22.4%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Calvert Equity Fund Class A has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.94% compared to the category average of 0.99%.

New Alternatives Fund Class A aims for long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities, such as real-estate investment trusts and American Depository Receipts.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has a three and five-year returns of 27.6% and 20.4%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

New Alternatives Fund Class A has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.96% compared to the category average of 1.26%.

Parnassus Mid Cap Growth Fund – Investor aims for capital appreciation. The fund invests the majority of assets in mid-sized growth companies.

This Zacks Sector – Large Cap Value has a history of positive total returns for more than 10 years. Specifically, Parnassus Mid Cap Growth Fund - Investor has returned 16.2% and 13.7% for the three and five-year periods, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Parnassus Mid Cap Growth Fund - Investor has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.83%, below the category average of 1.09%.

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