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What are the most popular mutual funds that invest in the automotive sector?

There are few mutual funds that invest primarily in the automobile industry, although major auto companies such as Ford, Toyota and General Motors are among the holdings of a number of mutual funds. Among the few funds that focus specifically on the automotive industry are the Fidelity Select Automotive portfolio and the Rydex Transportation Fund.

Part of the broader transportation sector, the automotive industry is made up of a wide range of businesses and companies responsible for the design, production, marketing and sale of automobiles. The industry is heavily regulated by safety boards, due to the nature of its products. Cars and other motor vehicles must comply with a large number of regulations, both local and international, before they can be sold on the market.

Fidelity Select Automotive Portfolio

Fidelity Select Automotive Portfolio Fund is designed to obtain capital appreciation for clients through investments in strong growth and income stocks. A minimum of 80% of this fund’s assets is invested in common stocks of companies that are primarily responsible for the production, marketing or sale of automobiles, trucks or specialty vehicles, or parts and related services. The fund invests in both foreign and domestic issues. Twice a year, the fund pays dividends. The fund is undiversified, with lower risk than the industry average. Some of the top holdings in this fund are Tesla, Toyota, and General Motors as of December 2020.

Rydex Transportation Fund

The Rydex Transportation Fund is a pure-play fund that seeks maximum capital appreciation through a variety of investment instruments with exposure to the transportation sector. The fund invests most of its assets in securities of US transportation companies. It also invests in derivatives, primarily futures, stock options and equity indices, and is sometimes also invested in US government securities. The fund uses investments in US certificates of deposit (ADR) for the trade of foreign transport companies. The risk level of this fund is higher than the industry average. Top holdings in this fund include Tesla, Union Pacific, UPS and Uber in January 2021.

Emerging Markets steadily increase their purchases of cars and other motor vehicles. The main emerging markets as far as the automotive industry is concerned are the BRIC countries – Brazil, Russia, India and China. Iran and Indonesia are other emerging markets with potentially strong demand for automobiles. Therefore, investors interested in the automotive industry may also consider emerging market funds that have significant investments in the industry.

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