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4 Technology Mutual Funds to Invest in With Rate Cuts in the Horizon
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The technology sector has had a fabulous 2023. Tech stocks have soared on the emergence of next-generation artificial intelligence and a subsequent semiconductor boom. Stocks from the tech sector have grown exponentially, and even after a slight correction at the beginning of the second half of the year, they have continued to make rapid strides. The S&P 500 Select Sector SPDR for Technology (XLK) advanced 49.7% and Communication Services (XLC) have jumped 46.4% this year as of Nov 30.
The dominance of technology stocks is on display, and the biggest evidence, perhaps, is the tech-heavy Nasdaq Composite, jumping 43.3% since the beginning of the year, as of Dec 22. Even the S&P 500 Index, which has advanced 23.8% in the same period, has risen on the back of the tech boom, with roughly 28% of its market cap comprising the seven technology giants, Microsoft, Amazon, Alphabet, Apple, Tesla, Meta and the biggest mover of the year, Nvidia. As of Nov 30, The aforementioned “Magnificent Seven” stocks have contributed 67% of this year's total return for the S&P 500, such has been the dominance of tech stocks.
Over the last couple of months, market participants have been considering the signals coming in from the Fed about future rate hikes and seem to be ignoring the hawkish warnings. They are pivoting on comments from Fed Chair Jerome Powell that the rate-hike cycle has most likely ended. While the Fed noted from its December meeting that there might be three rate cuts in 2024, investors are anticipating at least five or six cuts, and the first one as early as March 2024.
In such an environment, treasury yields would be climbing down even further from the 16-year highs they witnessed in October, and mega-cap growth stocks like technology would seem valuable assets for the future. Technology would continue to ride the wave and grow even further.
Hence, astute investors may look to invest in technology mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected four such technology mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Select Semiconductors (FSELX - Free Report) fund usually invests the majority of its net assets in common stocks of companies engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX’s advisors use fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions for the fund’s investment decisions.
Adam Benjamin has been the lead manager of FSELX since March 2020. Three major holdings for the fund are 24.8% in NVIDIA, 8.4% in NXP Semiconductors and 8% in On Semiconductor.
FSELX’s 3-year and 5-year annualized returns are 20.9% and 29.8%, respectively. Its net expense ratio is 0.69% compared to the category average of 1.05%. FSELX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
DWS Science and Technology (KTCAX - Free Report) invests the majority of its net assets in common stocks of science and technology companies. KTCAX invests in companies of any size, and may concentrate in one or more industries in the technology sector.
Sebastian P. Werner has been the lead manager of KTCAX since November 2017. Three major holdings for the fund are 11.1% in NVIDIA, 8.2% in Meta and 7.4% in Microsoft.
KTCAX’s 3-year and 5-year annualized returns are 6.9% and 17.3%, respectively. Its net expense ratio is 0.69% compared to the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.
Putnam Global Technology Fund (PGTAX - Free Report) seeks capital appreciation by investing the majority of its net assets in common stocks of large and midsize technology companies worldwide that the advisor believes have favorable investment potential.
Andrew N. O'Brien has been the lead manager of PGTAX since October 2023. Three major holdings for the fund are 18.6% in Microsoft, 16.4% in Apple and 8.7% in Nvidia.
PGTAX’s 3-year and 5-year annualized returns are 7.3% and 20.8%, respectively. Its net expense ratio is 0.83% compared to the category average of 1.05%. PGTAX has a Zacks Mutual Fund Rank #2.
Fidelity Advisor Semiconductors (FELIX - Free Report) fund usually invests the majority of its net assets in common stocks of companies engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FELIX’s advisors use fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions for the fund’s investment decisions.
Adam Benjamin has been the lead manager of FELIX since March 2020. Three major holdings for the fund are 24.9% in NVIDIA, 8.4% in NXP Semiconductors and 8.3% in On Semiconductor.
FELIX’s 3-year and 5-year annualized returns are 19.4% and 28.8%, respectively. Its net expense ratio is 0.74% compared to the category average of 1.05%. FELIX has a Zacks Mutual Fund Rank #1.
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4 Technology Mutual Funds to Invest in With Rate Cuts in the Horizon
The technology sector has had a fabulous 2023. Tech stocks have soared on the emergence of next-generation artificial intelligence and a subsequent semiconductor boom. Stocks from the tech sector have grown exponentially, and even after a slight correction at the beginning of the second half of the year, they have continued to make rapid strides. The S&P 500 Select Sector SPDR for Technology (XLK) advanced 49.7% and Communication Services (XLC) have jumped 46.4% this year as of Nov 30.
The dominance of technology stocks is on display, and the biggest evidence, perhaps, is the tech-heavy Nasdaq Composite, jumping 43.3% since the beginning of the year, as of Dec 22. Even the S&P 500 Index, which has advanced 23.8% in the same period, has risen on the back of the tech boom, with roughly 28% of its market cap comprising the seven technology giants, Microsoft, Amazon, Alphabet, Apple, Tesla, Meta and the biggest mover of the year, Nvidia. As of Nov 30, The aforementioned “Magnificent Seven” stocks have contributed 67% of this year's total return for the S&P 500, such has been the dominance of tech stocks.
Over the last couple of months, market participants have been considering the signals coming in from the Fed about future rate hikes and seem to be ignoring the hawkish warnings. They are pivoting on comments from Fed Chair Jerome Powell that the rate-hike cycle has most likely ended. While the Fed noted from its December meeting that there might be three rate cuts in 2024, investors are anticipating at least five or six cuts, and the first one as early as March 2024.
In such an environment, treasury yields would be climbing down even further from the 16-year highs they witnessed in October, and mega-cap growth stocks like technology would seem valuable assets for the future. Technology would continue to ride the wave and grow even further.
Hence, astute investors may look to invest in technology mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected four such technology mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Select Semiconductors (FSELX - Free Report) fund usually invests the majority of its net assets in common stocks of companies engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX’s advisors use fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions for the fund’s investment decisions.
Adam Benjamin has been the lead manager of FSELX since March 2020. Three major holdings for the fund are 24.8% in NVIDIA, 8.4% in NXP Semiconductors and 8% in On Semiconductor.
FSELX’s 3-year and 5-year annualized returns are 20.9% and 29.8%, respectively. Its net expense ratio is 0.69% compared to the category average of 1.05%. FSELX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
DWS Science and Technology (KTCAX - Free Report) invests the majority of its net assets in common stocks of science and technology companies. KTCAX invests in companies of any size, and may concentrate in one or more industries in the technology sector.
Sebastian P. Werner has been the lead manager of KTCAX since November 2017. Three major holdings for the fund are 11.1% in NVIDIA, 8.2% in Meta and 7.4% in Microsoft.
KTCAX’s 3-year and 5-year annualized returns are 6.9% and 17.3%, respectively. Its net expense ratio is 0.69% compared to the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.
Putnam Global Technology Fund (PGTAX - Free Report) seeks capital appreciation by investing the majority of its net assets in common stocks of large and midsize technology companies worldwide that the advisor believes have favorable investment potential.
Andrew N. O'Brien has been the lead manager of PGTAX since October 2023. Three major holdings for the fund are 18.6% in Microsoft, 16.4% in Apple and 8.7% in Nvidia.
PGTAX’s 3-year and 5-year annualized returns are 7.3% and 20.8%, respectively. Its net expense ratio is 0.83% compared to the category average of 1.05%. PGTAX has a Zacks Mutual Fund Rank #2.
Fidelity Advisor Semiconductors (FELIX - Free Report) fund usually invests the majority of its net assets in common stocks of companies engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FELIX’s advisors use fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions for the fund’s investment decisions.
Adam Benjamin has been the lead manager of FELIX since March 2020. Three major holdings for the fund are 24.9% in NVIDIA, 8.4% in NXP Semiconductors and 8.3% in On Semiconductor.
FELIX’s 3-year and 5-year annualized returns are 19.4% and 28.8%, respectively. Its net expense ratio is 0.74% compared to the category average of 1.05%. FELIX has a Zacks Mutual Fund Rank #1.
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 >>