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The technology sector has seen a strong rally in 2023, mostly due to a boom in artificial intelligence and related sectors. The tech-heavy NASDAQ composite has rewarded investors with a 30.5% gain as compared to the S&P 500 and the Dow’s gain of 24.2% and 13.3%, respectively, over the year-to-date period.
The NASDAQ 100 Technology Sector Index is up 65.4% in the same period. Investors who had parked their money in tech stocks during post-pandemic and high-inflation periods have earned attractive returns.
Technology companies are generally interest rate sensitive due to the constant need for development. Expenditures are high because of research and development, and other related costs. The Federal Reserve’s aggressive monetary policy tightening so far to counter inflation has led to a high borrowing cost. This has, in turn, impacted the profitability of tech companies.
The Federal Reserve, in its last policy meeting, has kept the interest rate unchanged and hinted at interest rate cuts in 2024 as inflation is inching toward a favorable zone. The annual rise in the Consumer Price Index for the month of November was 3.1% from a year ago. The monthly rate indicates a modest rise of 0.1% from October to November mostly due to an increase in the rental cost.
The U.S. economy is still resilient, with 5.2% GDP growth in Q3 beating the Street estimate of 4.9%. Though the Fed’s 2% inflation target is still far from reach, responding to the current developments, the central bank will most likely ease its monetary policy outlook in the near future.
Thus, the future of the tech industry remains optimistic. The new wave of regenerative artificial intelligence, machine learning, cloud computing, the Internet of Things, and robotics are also expected to drive growth among tech stocks. It will be prudent to invest in mutual funds, having tech companies as their holdings for better returns in the long run.
We have thus selected three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive year-to-date, three-year and five-year annualized returns, and minimum initial investments within $5000, and carry a lower expense ratio than the category average of 1.05%. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests most of its assets in common stocks of both foreign and domestic companies that are primarily engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX advisors make investment decisions based on fundamental analysis factors like financial condition and industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. The fund has invested 24.8% in NVIDIA, 8.4% in NXP Semiconductors and 8% in ON Semiconductor, along with various other tech companies, as of Aug 31, 2023.
As of Nov 30, 2023, FSELX has year-to-date, three-year and five-year annualized returns of nearly 64.3%, 20.9% and 29.8%, respectively. FSELX has an annual expense ratio of 0.68%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Red Oak Technology Select (ROGSX - Free Report) invests most of its net assets in equity securities of domestic companies operating in the technology sector, as determined by the fund’s advisors. ROGSX advisors may also invest in equity REIT’s, common stocks of foreign companies and American Depositary Receipts.
Robert D. Stimpson has been the lead manager of ROGSX since Jan 16, 2019. The fund has invested 7.4% in Microsoft, 6.8%in Apple and 6.4% in KLA, along with various other tech companies, as of Jul 31, 2023.
As of Nov 30, 2023, ROGSX has year-to-date, three-year, and five-year annualized returns of 41.6%, 8.4% and 13.8%, respectively. ROGSX has an annual expense ratio of 0.94%.
DWS Science and Technology (KTCSX - Free Report) fund invests most of its assets along with borrowings, if any, incommon stocks and initial public offerings of domestic science and technology companies, irrespective of their market capitalization. KTCSX advisors may also invest in foreign companies from the technology sector or other industries within the technology sector from developed and emerging market economies.
Sebastian P. Werner has been the lead manager of KTCSX since Nov 30, 2017. The fund has invested 11.1% in NVIDIA, 8.2%in Meta Platforms and 7.4% in Microsoft, along with various other tech companies, as of Jul 31, 2023.
As of Nov 30, 2023, KTCSX has year-to-date, three-year, and five-year annualized returns of 50.1%, 7.1% and 17.5%, respectively. KTCSX has an annual expense ratio of 0.73%.
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3 Technology Mutual Funds to Buy Now for 2024
The technology sector has seen a strong rally in 2023, mostly due to a boom in artificial intelligence and related sectors. The tech-heavy NASDAQ composite has rewarded investors with a 30.5% gain as compared to the S&P 500 and the Dow’s gain of 24.2% and 13.3%, respectively, over the year-to-date period.
The NASDAQ 100 Technology Sector Index is up 65.4% in the same period. Investors who had parked their money in tech stocks during post-pandemic and high-inflation periods have earned attractive returns.
Technology companies are generally interest rate sensitive due to the constant need for development. Expenditures are high because of research and development, and other related costs. The Federal Reserve’s aggressive monetary policy tightening so far to counter inflation has led to a high borrowing cost. This has, in turn, impacted the profitability of tech companies.
The Federal Reserve, in its last policy meeting, has kept the interest rate unchanged and hinted at interest rate cuts in 2024 as inflation is inching toward a favorable zone. The annual rise in the Consumer Price Index for the month of November was 3.1% from a year ago. The monthly rate indicates a modest rise of 0.1% from October to November mostly due to an increase in the rental cost.
The U.S. economy is still resilient, with 5.2% GDP growth in Q3 beating the Street estimate of 4.9%. Though the Fed’s 2% inflation target is still far from reach, responding to the current developments, the central bank will most likely ease its monetary policy outlook in the near future.
Thus, the future of the tech industry remains optimistic. The new wave of regenerative artificial intelligence, machine learning, cloud computing, the Internet of Things, and robotics are also expected to drive growth among tech stocks. It will be prudent to invest in mutual funds, having tech companies as their holdings for better returns in the long run.
We have thus selected three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive year-to-date, three-year and five-year annualized returns, and minimum initial investments within $5000, and carry a lower expense ratio than the category average of 1.05%. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests most of its assets in common stocks of both foreign and domestic companies that are primarily engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX advisors make investment decisions based on fundamental analysis factors like financial condition and industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. The fund has invested 24.8% in NVIDIA, 8.4% in NXP Semiconductors and 8% in ON Semiconductor, along with various other tech companies, as of Aug 31, 2023.
As of Nov 30, 2023, FSELX has year-to-date, three-year and five-year annualized returns of nearly 64.3%, 20.9% and 29.8%, respectively. FSELX has an annual expense ratio of 0.68%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Red Oak Technology Select (ROGSX - Free Report) invests most of its net assets in equity securities of domestic companies operating in the technology sector, as determined by the fund’s advisors. ROGSX advisors may also invest in equity REIT’s, common stocks of foreign companies and American Depositary Receipts.
Robert D. Stimpson has been the lead manager of ROGSX since Jan 16, 2019. The fund has invested 7.4% in Microsoft, 6.8%in Apple and 6.4% in KLA, along with various other tech companies, as of Jul 31, 2023.
As of Nov 30, 2023, ROGSX has year-to-date, three-year, and five-year annualized returns of 41.6%, 8.4% and 13.8%, respectively. ROGSX has an annual expense ratio of 0.94%.
DWS Science and Technology (KTCSX - Free Report) fund invests most of its assets along with borrowings, if any, incommon stocks and initial public offerings of domestic science and technology companies, irrespective of their market capitalization. KTCSX advisors may also invest in foreign companies from the technology sector or other industries within the technology sector from developed and emerging market economies.
Sebastian P. Werner has been the lead manager of KTCSX since Nov 30, 2017. The fund has invested 11.1% in NVIDIA, 8.2%in Meta Platforms and 7.4% in Microsoft, along with various other tech companies, as of Jul 31, 2023.
As of Nov 30, 2023, KTCSX has year-to-date, three-year, and five-year annualized returns of 50.1%, 7.1% and 17.5%, respectively. KTCSX has an annual expense ratio of 0.73%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>