Back to top

Image: Bigstock

3 Technology Mutual Funds to Invest in With Rate Hikes Stabilizing

Read MoreHide Full Article

One sector that has made a roaring comeback this year is technology. The emergence of next-generation artificial intelligence has driven the sector’s growth, and tech stocks have soared. Even after the massive boom of the first half of 2023 has subsided, the S&P 500 Select Sector SPDR for Technology (XLK) advanced 32.7% and Communication Services (XLC) jumped 35.8% year to date as of Oct 31.

The dominance of technology stocks is on display, and the biggest evidence, perhaps, is the tech-heavy Nasdaq Composite jumping 31.5% since the beginning of the year, as of Nov 13. Even the S&P 500 Index, which has advanced 14.9% 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. Meanwhile, the Dow Jones, which might not be called a tech index, has advanced a meager 3.6%.

Over the last two weeks, market participants have been considering the signals coming in from the Fed about future rate hikes and seem to be ignoring the hawkish warnings. There is a general feeling that the Fed has most likely reached the end of its rate-hiking cycle and in doing so, will avoid sending the economy into a recession. Investors are also betting on the fact that the consumer-side inflation numbers for October due today will show inflation slowing down, thereby discouraging the central bank from further policy-tightening.

This would entail treasury yields climbing down further, 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 three 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.

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 20.5% and 26.3%, respectively. Its net expense ratio is 0.74% compared to the category average of 1.05%. FELIX 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.

Janus Henderson VIT Global Technology and Innovation Portfolio (JGLTX - Free Report) fund aims for long-term growth of capital and specializes in technology. JGLTX invests at least the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.

Jonathan Cofsky has been the lead manager of JGLTX since February 2022. Three major holdings for the fund are 11.9% in Microsoft, 6.6% in Apple and 6% in ASML Holding.

JGLTX’s 3-year and 5-year annualized returns are 3.8% and 14.9%, respectively. Its net expense ratio is 0.74% compared to the category average of 1.05%. JGLTX 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.

Di Yao has been the lead manager of PGTAX since December 2012. 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 7.2% and 17.2%, respectively. Its net expense ratio is 0.56% compared to the category average of 1.05%. PGTAX has a Zacks Mutual Fund Rank #2.

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 >>

Published in