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4 Tech Mutual Funds That Stand to Gain From Interest Rate Cut
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In a much-anticipated move, the Federal Reserve decided to cut its interest rate at the September FOMC meeting. Investors cheered the Fed’s decision of a 50-basis point rate cut, which brought the key lending rates to the range of 4.75-5.00%, the lowest since March 2022.
Elaborating Fed’s future plans Chairman Jerome Powell mentioned that the interest rate would fall further by 50 basis points till the end of this year, a full percentage point in 2025, and half of a percentage point in 2026. Since inflation is on track with the Fed’s projections, reducing interest rates will help in avoiding an unnecessarily higher unemployment burden and keep economic growth intact.
The tech sector in the United States has given investors attractive returns since 2023 due to a boom in artificial intelligence, machine learning and related sectors, contributing significantly to the profitability of the overall industry. The tech-heavy NASDAQ composite has risen 37.8% in the past year compared with the 33.6% and 25.3% rise of the S&P 500 and the Dow, respectively. The NASDAQ 100 Technology Sector Index has risen 33.4% in the same period.
Amid favorable market conditions, investors looking to buy mutual funds to earn higher returns in the future can consider tech mutual funds like Fidelity Select Semiconductors Portfolio (FSELX - Free Report) , Fidelity Advisor Technology Fund (FATIX - Free Report) , DWS Science and Technology (KTCAX - Free Report) and Janus Henderson Global Technology and Innovation Fund (JNGTX - Free Report) as these have a low expense ratio that can translate into higher returns. Other factors like the funds’ performance history, investment style and risk tolerance also act in their favor.
Why Choose Technology Mutual Funds Now?
Due to the constant need for development, technology companies are generally interest rate sensitive. Costs incurred in research and development, and other related expenditures are generally high. Favorable interest rate projections by Jerome Powell in his speech to bring back interest rates to the 2.75-3% range will surely boost profitability for tech players in the near future.
Also, 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 four mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a lower expense ratio of less than 1%. 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 fund 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 March 16, 2020. Most of the fund’s exposure was in companies like NVIDIA (25%), NXP Semiconductors (6.9%) and ON Semiconductor (6.7%) as of May 31, 2024.
FSELX’s three-year and five-year annualized returns of nearly 27% and 36.3%, respectively. FSELX has an annual expense ratio of 0.67%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Advisor Technology Fund invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements. FATIX advisors choose to invest in stocks based on fundamental analysis factors like financial condition and industry position, along with market and economic conditions.
Adam Benjamin has been the lead manager of FATIX since July 20, 2020. Most of the fund’s exposure was in companies like NVIDIA (19%), Microsoft (16.5%), and Apple (12.3%) as of April 30, 2024.
FATIX’s three-year and five-year annualized returns are 10.7% and 25.3%, respectively. FATIX has an annual expense ratio of 0.70%.
DWS Science and Technology 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. KTCAX 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 KTCAX since Dec. 1, 2017. Most of the fund’s exposure was in companies like Microsoft (9.5%), NVIDIA (9.2%) and Meta Platforms (8.8%) as of April 30, 2024.
KTCAX’s three-year and five-year annualized returns are 8.8% and 20.7%, respectively. KTCAX has an annual expense ratio of 0.87%.
Janus Henderson Global Technology and Innovation Fund invests most of its assets along with borrowings, if any, indomestic and foreign equity securities of companies that, according to the portfolio manager, will benefit significantly from improvements in technology. JNGTX advisors choose to invest in companies based on their growth potential.
Denny Fish has been the lead manager of JNGTX since Jan. 12, 2016. Most of the fund’s exposure was in companies like Microsoft (10.7%), NVIDIA (10.4%) and Meta Platforms (5.7%) as of March 31, 2024.
JNGTX’s three-year and five-year annualized returns are 6.2% and 19.7%, respectively. JNGTX has an annual expense ratio of 0.78%.
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4 Tech Mutual Funds That Stand to Gain From Interest Rate Cut
In a much-anticipated move, the Federal Reserve decided to cut its interest rate at the September FOMC meeting. Investors cheered the Fed’s decision of a 50-basis point rate cut, which brought the key lending rates to the range of 4.75-5.00%, the lowest since March 2022.
Elaborating Fed’s future plans Chairman Jerome Powell mentioned that the interest rate would fall further by 50 basis points till the end of this year, a full percentage point in 2025, and half of a percentage point in 2026. Since inflation is on track with the Fed’s projections, reducing interest rates will help in avoiding an unnecessarily higher unemployment burden and keep economic growth intact.
The tech sector in the United States has given investors attractive returns since 2023 due to a boom in artificial intelligence, machine learning and related sectors, contributing significantly to the profitability of the overall industry. The tech-heavy NASDAQ composite has risen 37.8% in the past year compared with the 33.6% and 25.3% rise of the S&P 500 and the Dow, respectively. The NASDAQ 100 Technology Sector Index has risen 33.4% in the same period.
Amid favorable market conditions, investors looking to buy mutual funds to earn higher returns in the future can consider tech mutual funds like Fidelity Select Semiconductors Portfolio (FSELX - Free Report) , Fidelity Advisor Technology Fund (FATIX - Free Report) , DWS Science and Technology (KTCAX - Free Report) and Janus Henderson Global Technology and Innovation Fund (JNGTX - Free Report) as these have a low expense ratio that can translate into higher returns. Other factors like the funds’ performance history, investment style and risk tolerance also act in their favor.
Why Choose Technology Mutual Funds Now?
Due to the constant need for development, technology companies are generally interest rate sensitive. Costs incurred in research and development, and other related expenditures are generally high. Favorable interest rate projections by Jerome Powell in his speech to bring back interest rates to the 2.75-3% range will surely boost profitability for tech players in the near future.
Also, 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 four mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a lower expense ratio of less than 1%. 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 fund 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 March 16, 2020. Most of the fund’s exposure was in companies like NVIDIA (25%), NXP Semiconductors (6.9%) and ON Semiconductor (6.7%) as of May 31, 2024.
FSELX’s three-year and five-year annualized returns of nearly 27% and 36.3%, respectively. FSELX has an annual expense ratio of 0.67%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Advisor Technology Fund invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements. FATIX advisors choose to invest in stocks based on fundamental analysis factors like financial condition and industry position, along with market and economic conditions.
Adam Benjamin has been the lead manager of FATIX since July 20, 2020. Most of the fund’s exposure was in companies like NVIDIA (19%), Microsoft (16.5%), and Apple (12.3%) as of April 30, 2024.
FATIX’s three-year and five-year annualized returns are 10.7% and 25.3%, respectively. FATIX has an annual expense ratio of 0.70%.
DWS Science and Technology 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. KTCAX 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 KTCAX since Dec. 1, 2017. Most of the fund’s exposure was in companies like Microsoft (9.5%), NVIDIA (9.2%) and Meta Platforms (8.8%) as of April 30, 2024.
KTCAX’s three-year and five-year annualized returns are 8.8% and 20.7%, respectively. KTCAX has an annual expense ratio of 0.87%.
Janus Henderson Global Technology and Innovation Fund invests most of its assets along with borrowings, if any, indomestic and foreign equity securities of companies that, according to the portfolio manager, will benefit significantly from improvements in technology. JNGTX advisors choose to invest in companies based on their growth potential.
Denny Fish has been the lead manager of JNGTX since Jan. 12, 2016. Most of the fund’s exposure was in companies like Microsoft (10.7%), NVIDIA (10.4%) and Meta Platforms (5.7%) as of March 31, 2024.
JNGTX’s three-year and five-year annualized returns are 6.2% and 19.7%, respectively. JNGTX has an annual expense ratio of 0.78%.
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 >>