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Technology mutual funds are ideal for investors seeking long-term growth and impressive returns. Improving industry fundamentals and emerging technologies such as AI, ML, robotics and data science are the key catalysts to the sector’s growth.
In addition, the majority of funds investing in securities from the technology sector take a growth-oriented approach that includes focusing on companies with strong fundamentals and a relatively better investment prospect. Moreover, technology has come to have a broader meaning than just hardware and software. Social media and Internet companies are now part of the technology landscape.
The U.S. technology sector has been the best performer so far this year, backed especially by the work-from-home trend due to social distancing to curb the spread of COVID-19. The Technology Select Sector SPDR Fund (XLK) has gained 39.7% year to date.
Under such circumstances, investing in technology mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can be cumbersome. To that end, let us find out which of the two funds discussed below is better.
BlackRock Technology Opportunities Fund Investor A Shares (BGSAX - Free Report)
The fund aims for long-term capital appreciation. The fund invests majority of its assets in equity securities of U.S. and foreign companies across all market capitalizations that have fast and sustainable growth potential from the development, advancement and implementation of science and technology.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 36% over the 3-year and 79.9% over the 1-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.
BlackRock Technology Opportunities Fund Investor A Shares, as of the last filing, allocates its assets in the top two major groups; Large Growth and Intermediate Bond. Further, as of the last filing, Apple Inc., Microsoft Corp., and Amazon.com Inc. were the top holdings for BGSAX.
Sporting a Zacks Mutual Fund Rank #1 (Strong Buy), BGSAX was incepted in May 2000 and is managed by BlackRock. The fund carries an expense ratio of 1.18% and requires a minimal initial investment of $1,000.
The fund invests the majority of its assets in companies whose primary operations are related to software or information-based services. It primarily focuses on acquiring common stocks of both domestic and foreign companies.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the 3 and 1-year benchmarks are 26% and 30.8%, respectively. To see how this fund performed compared in its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Software & IT Services Portfolio, as of the last filing, allocates its assets primarily in Large Growth stocks. Further, as of the last filing, Microsoft Inc. and Visa Inc. were the top holdings for FSCSX.
This Zacks Rank #1 fund was incepted in July 1985 and carries an expense ratio of 0.71%. It requires a minimal initial investment of $0 and is managed by Fidelity.
To Conclude
While both BGSAX and FSCSX carry a Zacks Mutual Fund Rank #1, upon having a closer look, we find that the former is a clear winner. Despite BGSAX’s administrative and other operating expenses being higher than FSCSX’s, the former has a history of providing higher and consistent returns.
Also, BGSAX has returned 72.2% year to date compared with 18.5% returned by FSCSX. Meanwhile, BGSAX offers slightly higher risk compared to FSCSX. While BGSAX has a 3-year beta of 1.10, FSCSX’s is 0.99.
However, BGSAX has a 3-year alpha of 19.33, compared to FSCSX’s 14.22. It should be noted that a higher alpha indicates that managers of the fund, through careful stock selection, have been able to extract higher returns than the market. So it is only fair to conclude that BGSAX is worth buying, given its higher returns despite slightly higher inherent risk.
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BGSAX Versus FSCSX: Which Fund Should You Bet On?
Technology mutual funds are ideal for investors seeking long-term growth and impressive returns. Improving industry fundamentals and emerging technologies such as AI, ML, robotics and data science are the key catalysts to the sector’s growth.
In addition, the majority of funds investing in securities from the technology sector take a growth-oriented approach that includes focusing on companies with strong fundamentals and a relatively better investment prospect. Moreover, technology has come to have a broader meaning than just hardware and software. Social media and Internet companies are now part of the technology landscape.
The U.S. technology sector has been the best performer so far this year, backed especially by the work-from-home trend due to social distancing to curb the spread of COVID-19. The Technology Select Sector SPDR Fund (XLK) has gained 39.7% year to date.
Under such circumstances, investing in technology mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can be cumbersome. To that end, let us find out which of the two funds discussed below is better.
BlackRock Technology Opportunities Fund Investor A Shares (BGSAX - Free Report)
The fund aims for long-term capital appreciation. The fund invests majority of its assets in equity securities of U.S. and foreign companies across all market capitalizations that have fast and sustainable growth potential from the development, advancement and implementation of science and technology.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 36% over the 3-year and 79.9% over the 1-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.
BlackRock Technology Opportunities Fund Investor A Shares, as of the last filing, allocates its assets in the top two major groups; Large Growth and Intermediate Bond. Further, as of the last filing, Apple Inc., Microsoft Corp., and Amazon.com Inc. were the top holdings for BGSAX.
Sporting a Zacks Mutual Fund Rank #1 (Strong Buy), BGSAX was incepted in May 2000 and is managed by BlackRock. The fund carries an expense ratio of 1.18% and requires a minimal initial investment of $1,000.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report)
The fund invests the majority of its assets in companies whose primary operations are related to software or information-based services. It primarily focuses on acquiring common stocks of both domestic and foreign companies.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the 3 and 1-year benchmarks are 26% and 30.8%, respectively. To see how this fund performed compared in its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Software & IT Services Portfolio, as of the last filing, allocates its assets primarily in Large Growth stocks. Further, as of the last filing, Microsoft Inc. and Visa Inc. were the top holdings for FSCSX.
This Zacks Rank #1 fund was incepted in July 1985 and carries an expense ratio of 0.71%. It requires a minimal initial investment of $0 and is managed by Fidelity.
To Conclude
While both BGSAX and FSCSX carry a Zacks Mutual Fund Rank #1, upon having a closer look, we find that the former is a clear winner. Despite BGSAX’s administrative and other operating expenses being higher than FSCSX’s, the former has a history of providing higher and consistent returns.
Also, BGSAX has returned 72.2% year to date compared with 18.5% returned by FSCSX. Meanwhile, BGSAX offers slightly higher risk compared to FSCSX. While BGSAX has a 3-year beta of 1.10, FSCSX’s is 0.99.
However, BGSAX has a 3-year alpha of 19.33, compared to FSCSX’s 14.22. It should be noted that a higher alpha indicates that managers of the fund, through careful stock selection, have been able to extract higher returns than the market. So it is only fair to conclude that BGSAX is worth buying, given its higher returns despite slightly higher inherent risk.
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 >>