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Over the past decade, the rapid change in consumer behavior and the pandemic have created a suitable environment for thematic investing. Last year, themes like work-from-home and do-it-yourself were super hits and this year, clean energy, artificial intelligence (AI), and cloud are also emerging as winners. Given the trend, let’s talk about four trends that investors can bet on in the last quarter of 2021:
Cloud Computing & Cybersecurity are hot tech trends with immense potential to grow. The work & learn-from-home trend last year gave a significant boost to cloud computing and cybersecurity. Businesses had to shift from on-premise data storage to the cloud to facilitate remote working. But this called for the implementation of security in higher levels like multi-factor authentication (MFA) to enable automated authentication decisions for select users. Cybersecurity applications work much faster than the traditional system and thus have become a necessity for businesses.
You can’t ignore the importance of AI & Robotics in the 4th Industrial Revolution. The rapid digital transformation, which is breaking barriers in the digital, physical and biological spheres, is caused by the fusion of technologies, with AI & Robotics being the centerpiece of such change. Businesses looking for optimizing operations, boosting profitability and driving innovation should adopt AI. In fact, AI and automation (read: robotics) are the solutions that can perform repetitive jobs at a scale larger than that of humans and also adapt to changing situations by learning things voluntarily. It adds value to business workflows and harnesses the power of human resources and machines to improve customer experience, giving businesses a competitive edge over others.
Clean Technology can never run out of steam. The field has witnessed significant growth in the last few years, especially with governments emphasizing the adoption of cleaner and greener technology and investing billions in reversing the climate crisis. Government and businesses are deploying millions for clean power generation, smart agriculture and building retrofits. Tech bigwigs like Amazon have set up a $2-billion fund to invest in climate initiatives. In contrast, Alphabet’s Google has set goals to become carbon neutral by 2030, in line with President Joe Biden’s carbon-neutral goals.
Last but one of the most effective trends is environmental, social,and governance (ESG) investing. Sustainable funds have proven to be capable of surviving market gyrations, especially during high volatility, and performed outstandingly during the pandemic. This theme has a plethora of niches like climate change, social justice and offers more ethical investing options for investors. In the second quarter of 2021, sustainable active funds attracted $8.4 billion, a new record.
4 Top Fund Picks
Given thematic investment allows capitalizing on emerging trends, we have selected four funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) and have significant exposure to the themes mentioned above. These funds also have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.
The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Technology Portfolio (FSPTX - Free Report) fund aims for capital appreciation. It invests primarily in equity securities, especially common stocks of companies engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, this non-diversified has returned 30.7% and 31.8% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSPTX has an annual expense ratio of 0.69% versus the category average of 1.05%.
New Alternatives Fund Class A (NALFX - Free Report) seeks long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities such as real estate investment trusts and American Depository Receipts.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has three and five-year returns of 29.3% and 19.6%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has an annual expense ratio of 0.96% compared to the category average of 1.26%.
Parnassus Mid Cap Growth Fund - Investor (PARNX - Free Report) aims for capital appreciation. The fund invests a majority of assets in mid-sized growth companies.
This Zacks Sector – Large Cap Value has a history of positive total returns for more than 10 years. Specifically, PARNX has returned 17.7% and 15.7% for the three and five-year periods, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX has an annual expense ratio of 0.83%, which is below the category average of 1.09%.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) aims for capital appreciation. The non-diversified fund invests most assets in common stocks of companies engaged in research, design, production or distribution of products or processes related to software or information-based services.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSCSX has returned 27.3% and 28.3% over the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCSX has an annual expense ratio of 0.70% versus the category average of 1.05%.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
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4 Funds to Buy In Line With Thematic Trends in Q4
Over the past decade, the rapid change in consumer behavior and the pandemic have created a suitable environment for thematic investing. Last year, themes like work-from-home and do-it-yourself were super hits and this year, clean energy, artificial intelligence (AI), and cloud are also emerging as winners. Given the trend, let’s talk about four trends that investors can bet on in the last quarter of 2021:
Cloud Computing & Cybersecurity are hot tech trends with immense potential to grow. The work & learn-from-home trend last year gave a significant boost to cloud computing and cybersecurity. Businesses had to shift from on-premise data storage to the cloud to facilitate remote working. But this called for the implementation of security in higher levels like multi-factor authentication (MFA) to enable automated authentication decisions for select users. Cybersecurity applications work much faster than the traditional system and thus have become a necessity for businesses.
You can’t ignore the importance of AI & Robotics in the 4th Industrial Revolution. The rapid digital transformation, which is breaking barriers in the digital, physical and biological spheres, is caused by the fusion of technologies, with AI & Robotics being the centerpiece of such change. Businesses looking for optimizing operations, boosting profitability and driving innovation should adopt AI. In fact, AI and automation (read: robotics) are the solutions that can perform repetitive jobs at a scale larger than that of humans and also adapt to changing situations by learning things voluntarily. It adds value to business workflows and harnesses the power of human resources and machines to improve customer experience, giving businesses a competitive edge over others.
Clean Technology can never run out of steam. The field has witnessed significant growth in the last few years, especially with governments emphasizing the adoption of cleaner and greener technology and investing billions in reversing the climate crisis. Government and businesses are deploying millions for clean power generation, smart agriculture and building retrofits. Tech bigwigs like Amazon have set up a $2-billion fund to invest in climate initiatives. In contrast, Alphabet’s Google has set goals to become carbon neutral by 2030, in line with President Joe Biden’s carbon-neutral goals.
Last but one of the most effective trends is environmental, social, and governance (ESG) investing. Sustainable funds have proven to be capable of surviving market gyrations, especially during high volatility, and performed outstandingly during the pandemic. This theme has a plethora of niches like climate change, social justice and offers more ethical investing options for investors. In the second quarter of 2021, sustainable active funds attracted $8.4 billion, a new record.
4 Top Fund Picks
Given thematic investment allows capitalizing on emerging trends, we have selected four funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) and have significant exposure to the themes mentioned above. These funds also have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.
The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Technology Portfolio (FSPTX - Free Report) fund aims for capital appreciation. It invests primarily in equity securities, especially common stocks of companies engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, this non-diversified has returned 30.7% and 31.8% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSPTX has an annual expense ratio of 0.69% versus the category average of 1.05%.
New Alternatives Fund Class A (NALFX - Free Report) seeks long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities such as real estate investment trusts and American Depository Receipts.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has three and five-year returns of 29.3% and 19.6%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has an annual expense ratio of 0.96% compared to the category average of 1.26%.
Parnassus Mid Cap Growth Fund - Investor (PARNX - Free Report) aims for capital appreciation. The fund invests a majority of assets in mid-sized growth companies.
This Zacks Sector – Large Cap Value has a history of positive total returns for more than 10 years. Specifically, PARNX has returned 17.7% and 15.7% for the three and five-year periods, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PARNX has an annual expense ratio of 0.83%, which is below the category average of 1.09%.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) aims for capital appreciation. The non-diversified fund invests most assets in common stocks of companies engaged in research, design, production or distribution of products or processes related to software or information-based services.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSCSX has returned 27.3% and 28.3% over the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCSX has an annual expense ratio of 0.70% versus the category average of 1.05%.
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.
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