Top 5 Energy Mutual Funds (April 2011)

Even as the world’s energy resources are pushed to the limit, the demand for energy continues to rise steadily year over year. This is particularly true for emerging economies such as China and India where energy consumption is rising exponentially. Though efforts to harness alternative energy sources as diverse as oil shale continue, prices for this precious resource continue to rise. However investors could benefit from this phenomenon by investing in the energy sector. Mutual funds focusing on energy are a superior option in this case as they reduce risks involved by holding widely diversified portfolios.

Below we will share with you 5 top rated energy mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Ivy Energy A (IEYAX) seeks capital appreciation over the long term. The fund invests at least 80% of its assets in securities issued by energy companies. Companies engaged in exploration, discovery, production and distribution of energy constitute the fund’s major investments returned 36% over the last one year period.

The energy mutual fund has a minimum initial investment of $500 and an expense ratio of 1.60% compared to a category average of 1.84%.

ICON Energy (ICENX) invests the majority of its assets in equity securities of companies form the energy sector traded in the U.S. The fund purchases common and preferred stocks of companies of all sizes. It is non-diversified and seeks long term capital growth. The energy mutual fund has a five year annualized return of 7.66%.

The fund manager is Derek Rollingson and he has managed this energy fund since 2007.

Rydex Energy (RYEIX) seeks to provide investors long-term capital growth. It invests heavily in equity securities and derivatives of energy companies which are traded in the U.S. This includes companies which provide products and services to the energy sector. This energy fund returned 37.43% over the last one year period.

As of February 2011, this energy mutual fund held 85 issues, with 6.39% of its total assets invested in ExxonMobil Corporation.

Franklin Natural Resources A (FRNRX) invests the majority of its assets in equity and debt securities of natural resources companies. The fund may invest heavily in small-cap companies. Up to 50% of its assets may be invested in foreign securities. This energy mutual has a ten year annualized return of 13.45%.

The energy mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.04% compared to a category average of 1.52%.

Fidelity Select Energy (FSENX) seeks capital growth. It invests the majority of its assets in equity securities of companies whose principal operations are related to the energy sector. The fund invests in both conventional and alternative energy companies. The energy mutual fund returned 39.87% over the last one year period.

The fund manager is John Dowd and he has managed this energy fund since 2006.

To view the Zacks Rank and past performance of all energy mutual funds, then click here.

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