There are few mutual funds that invest primarily in the automotive industry, although major auto companies such as Ford, Toyota and General Motors are among the holdings of quite a number of mutual funds. Among the few funds that do have a specific focus on the auto industry are the Fidelity Select Automotive Portfolio and the Rydex Transportation Fund.
Part of the broader transportation sector, the automotive industry is composed of a wide range of companies and businesses responsible for designing, producing, marketing and selling automobiles. The industry is highly regulated by safety commissions, due to the nature of its products. Cars and other motor vehicles must comply with a vast number of regulations, both locally and internationally, before they are eligible to be sold in the marketplace. (For related reading, see: What is the automotive sector?)
Fidelity Select Automotive Portfolio
The Fidelity Select Automotive Portfolio fund is designed to gain capital appreciation for clients through investments in solid growth and income stocks. A minimum of 80% of this fund’s assets are invested in the common stocks of companies that are mainly responsible for the production, marketing or sales of cars, trucks or specialty vehicles, or the parts and services related to them. The fund invests both in foreign and domestic issues. Twice a year, the fund pays out dividends. The fund is non-diversified, with risk lower than the industry average. Some of this fund’s top holdings are General Motors, Tesla, Honda and Toyota as of June 2018.
Rydex Transportation Fund
The Rydex Transportation Fund is a non-diversified fund seeking maximum capital appreciation through a variety of investment instruments with exposure to the transportation sector. The fund invests the bulk of its assets in securities of U.S. transportation companies. It also invests in derivatives, primarily futures contracts, options on securities and stock indexes, and at times is invested in U.S. government securities as well. The fund uses investment in American depositary receipts (ADRs) to trade in foreign transportation companies. This fund’s risk is rated higher than the industry average. The top holdings for this fund include Union Pacific, UPS, CSX, Tesla and FedEx as of June 2018.
Emerging markets are steadily increasing their purchases of cars and other motor vehicles. The top emerging markets in regard to the automotive industry are the BRIC countries – Brazil, Russia, India and China. Other emerging markets with potentially powerful demand for automobiles are Iran and Indonesia. Therefore, investors interested in the auto industry may also wish to consider emerging market funds that have significant investment in the industry.
(For related reading, see: What economic indicators are important for investing in the automotive sector?)
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