Selecting the top funds for investment is problematic as not all funds are diversified enough. Moreover, as an investor, I think it’s crucial to study them to match my investment objectives. It’s worth mentioning that not all funds are an excellent long-term investment. Some of them follow a particular industry that can offer large-scale returns in a short time. On the contrary, they can also suffer massive declines if that particular sector falls.
I’ve explored some top investments for 2022 before. But since then, I’ve spotted three top funds I’m tempted to add to my own portfolio this year.
A thriving energy-focused fund
Fidelity Select Energy Portfolio is my first pick amongst top funds for 2022. It is narrowly focused on the energy sector, with 80% of its assets invested there.
Its portfolio includes top companies like Exxon Mobil, Chevron, and ConocoPhillips. These companies are a vital part of the energy sector, rapidly adapting to the environmental and regulatory pressures facing the industry today.
Since this potential top fund is primarily focused on one particular niche, its value dropped drastically when the energy sector received a huge blow due to Covid-19. But when the underlying companies adapted, their share prices quickly recovered. So I’m not surprised to see Fidelity Select Energy Portfolio appreciated by more than 150% in the past 18 months.
With the energy sector expected to boom, I believe this fund could generate excellent returns for my portfolio in 2022.
The largest non-financial top fund
Shelton NASDAQ-100 Index Direct aims to replicate the performance of the largest non-financial companies of the NASDAQ-100. It’s a fairly diversified index with more than 90% of assets invested in Technology (44.4%), Communications (31%), and Consumer Goods (22%) as of September 2021.
The technology sector has been highly volatile in the past few years. Since a major chunk of the fund’s assets is invested in the technology sector, the fund unsurprisingly has mirrored this volatility. And will undoubtedly continue to do so in the future. Therefore, I have to watch out for declining market signs.
But the allocation of assets has led to the fund’s performance matching the NASDAQ 100 index performance over the past fives years, bringing its annualised return to just under 25%. To me, the reward matches the volatility risk. And that’s why I believe this is a top fund for my portfolio.
A shield against inflation
Vanguard Inflation-Protected Securities follow a strict inflation-protection approach by investing in inflation-indexed securities, including bonds backed by the federal government.
This is one of the most attractive features in my mind. Why? Because the principal of these financial instruments is adjusted for inflation, quarterly, adding a layer of protection against the eroding effects of inflation.
Undoubtedly, the inflation protection approach is beneficial during tough times, especially as 2022 enters the picture. But historically, this fund doesn’t tend to perform well when the economy is thriving and could lead to comparatively low returns over the long term.
Having said that, the low fees combined with current rising inflation makes me believe this fund could be a top pick for my portfolio in 2022.
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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies, assets and strategies mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
