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COVID-Themed Funds to Survive the Omicron Wave: 4 Top Picks

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The COVID-19 virus has undergone innumerable mutations since it was first detected in Wuhan. The recent B.1.1.529 variant, also called omicron, was detected in South Africa with more than 30 mutations to the spike protein. Several European and Asian countries have already imposed restrictions and measures to curb the spread, with Australia and Japan closing international borders temporarily.

President Joe Biden has assured citizens that the omicron variant is concerning, there is no reason to panic and the country’s fight against it wouldn’t involve “shutdowns or lockdowns.” But, investors can look for COVID-themed mutual funds to survive the market volatility. Fidelity Select Technology Portfolio FSPTX, Fidelity Select Health Care Portfolio FSPHX,Fidelity Select Biotechnology Portfolio FBIOX and New Alternatives Fund Class A NALFX are funds with significant exposure to work-from-home, ESG (environmental, social and governance) and vaccine development-related investment themes.

Let’s begin with the trend holding momentum since the virus outbreak -- work and stay-at-home practices. The adoption and advancement in technology have helped several companies, educational institutions, medical centers remain operational to the maximum available capacity even as the virus wreaked havoc. Rapid digitalization across all sectors, from factory floors to elementary schools, is creating a long-term impact and will continue to grow even after the pandemic. In the education sector, smart campuses and digital libraries are helping modern learners, while for several corporate houses,  employees and clients are now connected through the cloud platform.

Businesses are now closer to the virtual platform with cybersecurity, remote communications, online project and document management constantly boosting employee motivation, even during the hard times. Along with that, e-commerce, online gaming & gambling, live streaming and entertainment have become an integral part of our lifestyles. These not only help people stay entertained at home but also narrow down international boundaries.

ESG has been a dominant investment theme since the pandemic outbreak. It has witnessed heavy inflows, especially with concerns regarding climate change and civil rights constantly drawing attention. Sustainable funds witnessed $15.7 billion in net inflows during the third quarter of 2021 in the United States, higher than the $9.8 billion seen in the third quarter of 2020. Now, with more millennials opting to focus on greener and cleaner investment, this theme is poised to grow.

Lastly, vaccination plays a crucial role in shielding citizen from the deadly virus. Though vaccines do not guarantee that one will not be infected with the virus, they reduce the risks of severity and death. Vaccine makers are constantly improving the vaccine's composition to create resistance from the variants and make booster dozes for added safety.

Top 4 Funds Picks

Given the current scenario, we have shortlisted 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 year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their 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 Technology Portfolio aims for capital appreciation. This non-diversified fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSPTX has returned 38.1% and 32.1% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Technology Portfolio carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.69%, below the category average of 1.05%.

Fidelity Select Health Care Portfoliofund aims for capital appreciation. This non-diversified fund invests the majority of assets in common stocks of companies principally engaged in the design, manufacture or sale of products or services used for or in connection with health care or medicine.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 20.2% and 19.9% 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 Health Care Portfolio, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.69% versus the category average of 1.03%.

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 the research, development and distribution of biotechnological products.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 17.6% and 16% 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%.

New Alternatives Fund Class Aseeks 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 etc.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. The fund has three and five-year returns of 32.4% and 19.8%, respectively. To see how this fund performed compared in 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%.

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