With every passing year, the world’s appetite for energy continues to increase steadily. Governments and corporations alike are constantly on the lookout for new energy sources or more efficient technology in this domain. For fast growing economies such as China and India, the situation is even more acute. Thus, prices of these invaluable resources are surging and investors could benefit from the situation by investing in the energy industry. Energy mutual funds are a superior option for forays into the industry 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.  To view the Zacks Rank and past performance of all energy funds, investors can click here to see the complete list of funds.

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. It focuses on acquiring equity securities, especially common stock. The energy mutual fund has a three year annualized return of 5.71%.

The energy mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.03% compared to a category average of 1.42%.

Fidelity Select Energy (FSENX) seeks capital growth. The fund invests a large share of its assets in equity securities of companies whose principal operations are related to the energy sector. The fund purchases both domestic and foreign securities. The energy mutual fund has a three year annualized return of 5.54%.

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

Rydex Energy Services (RYVIX) invests the majority of its assets in equity securities traded in U.S. markets and derivatives from the energy services sector. The fund focuses on investing in small and mid-cap companies from the sector. The energy mutual fund is non-diversified and has a three year annualized return of 6.44%.

As of June 2012, this energy mutual fund held 37 issues, with 11.11% of its total assets invested in Schlumberger NV.

Invesco Energy (FSTEX) seeks long term capital growth. The fund utilizes a large proportion of its assets to purchase securities issued by companies with strong linkages to the energy sector. It focuses on acquiring equity securities and may invest all its assets in foreign securities. The energy mutual fund has a three year annualized return of 3%. Continued...