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4 Technology Mutual Funds to Invest in as Rate-Hike Cycle Nears End
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A specter has been haunting Wall Street — that of a recession. Throughout 2022 and up until now, the Federal Reserve has been on an unrelenting path of raising interest rates to combat rising prices, thus stoking fears of a hard landing of the economy.
Treasury yields have gone up, and investors have fled from the uncertainties of the stock market to government bonds. One of the hardest-hit sectors has been technology. The S&P 500 Select Sector SPDR for technology has fallen 10.5% over the last 12 months as people have been driven away from growth stocks.
When an economy witnesses an accelerated pace of interest rate hikes, it impacts the future cash inflows for growth companies like large-cap tech, as they have less funding for innovations. However, as and when we have seen the markets doing well in this period of international turmoil and rising prices, more often than not, it has been driven by investors’ faith in the futuristic value of tech stocks.
During and as an immediate aftermath of the pandemic, the technology sector thrived, with consumers and institutions getting more tech-dependent by the day. Funding was plentiful, stocks soared, and the world braced for a new technology age where artificial intelligence would act as Man Friday for people operating from the safety of their homes.
The war in Ukraine and fears of an impending global recession, however, dealt a heavy blow to the sector. Central banks around the world turned hawkish, and market participants looked away from the benefits of tomorrow as they rushed to the safety of steady investment options. Yet, the sector always remains a focal point for investors as innovation can only move northward. The current slump can only be an aberration.
Also, signals have started to come in from the Fed that they might be nearing their rate-hiking cycle. In March, the Fed met to announce a 25 bps hike, a very basic increase, and Fed Chair Jerome Powell assured investors that the Fed is vigilant about the pressures it is putting on the economy.
With the recent and ongoing banking crisis, investors are currently anticipating no interest rate hike in the next Fed meeting. They are also not expecting interest rates to go down anytime soon, but such is the current state of the economy that even a rate pause would lift investor mood.
In such an eventuality, tech stocks are slated to make the most of the opportunity. They are already riding high on a fabulous January rally, and the S&P 500 Select Sector SPDR for technology is 9.7% in the green as of February. If rates do not go up any further, treasury yields would fall, and growth stocks would become more lucrative. Currently, there is no better sector tailor-made for “buy the dip” than technology.
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.
Black Oak Emerging Technology Fund (BOGSX - Free Report) usually invests the majority of its net assets in equity securities of emerging technology companies. BOGSX invests primarily in common stocks of companies that it considers well-positioned to become market leaders among emerging technology companies.
Robert D. Stimpson has been the lead manager of BOGSX since Apr 6, 2006. Three major holdings for the fund are 5.9% in Apple, 4.1% in KLA, and 4% in Kulicke & Soffa.
BOGSX’s 3-year and 5-year annualized returns are 17.1% and 13%, respectively. Its net expense ratio is 1.03% compared to the category average of 1.05%. BOGSX 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 Fund (KTCAX - Free Report) usually invests the majority of its net assets in common stocks of science and technology companies of any size. KTCAX focuses on one or more industries in the technology sector. The fund also invests in foreign securities and is non-diversified.
Sebastian P. Werner has been the lead manager of KTCAX since Nov 30, 2017. Three major holdings for the fund are 8.7% in Apple, 8.1% in Microsoft, and 7.4% in Alphabet.
KTCAX’s 3-year and 5-year annualized returns are 8.7% and 10.1%, respectively. Its net expense ratio is 0.89% compared to the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.
Janus Henderson Global Technology and Innovation Fund (JAGTX - Free Report) aims for the long-term growth of capital and specializes in technology. JAGTX 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. The fund offers a dividend annually.
Jonathan Cofsky has been the lead manager of JAGTX since Feb 28, 2022. Three major holdings for the fund are 12.8% in Microsoft, 6% in Apple, and 5.8% in ASML Holding.
JAGTX’s 3-year and 5-year annualized returns are 8% and 10.9%, respectively. Its net expense ratio is 0.90% compared to the category average of 1.05%. JAGTX has a Zacks Mutual Fund Rank #2.
Fidelity Advisor Technology Fund (FADTX - Free Report) seeks capital appreciation by investing the majority of its net assets in common stocks of companies principally engaged in processes or services that will provide or benefit significantly from technological advances and improvements. For its investment purposes, FADTX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FADTX since Jul 19, 2020. Three major holdings for the fund are 23.7% in Apple, 15.3% in Microsoft, and 5.6% in NVIDIA.
FADTX’s 3-year and 5-year annualized returns are 15.5% and 14.3%, respectively. Its net expense ratio is 0.97% compared to the category average of 1.05%. FADTX has a Zacks Mutual Fund Rank #2.
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4 Technology Mutual Funds to Invest in as Rate-Hike Cycle Nears End
A specter has been haunting Wall Street — that of a recession. Throughout 2022 and up until now, the Federal Reserve has been on an unrelenting path of raising interest rates to combat rising prices, thus stoking fears of a hard landing of the economy.
Treasury yields have gone up, and investors have fled from the uncertainties of the stock market to government bonds. One of the hardest-hit sectors has been technology. The S&P 500 Select Sector SPDR for technology has fallen 10.5% over the last 12 months as people have been driven away from growth stocks.
When an economy witnesses an accelerated pace of interest rate hikes, it impacts the future cash inflows for growth companies like large-cap tech, as they have less funding for innovations. However, as and when we have seen the markets doing well in this period of international turmoil and rising prices, more often than not, it has been driven by investors’ faith in the futuristic value of tech stocks.
During and as an immediate aftermath of the pandemic, the technology sector thrived, with consumers and institutions getting more tech-dependent by the day. Funding was plentiful, stocks soared, and the world braced for a new technology age where artificial intelligence would act as Man Friday for people operating from the safety of their homes.
The war in Ukraine and fears of an impending global recession, however, dealt a heavy blow to the sector. Central banks around the world turned hawkish, and market participants looked away from the benefits of tomorrow as they rushed to the safety of steady investment options. Yet, the sector always remains a focal point for investors as innovation can only move northward. The current slump can only be an aberration.
Also, signals have started to come in from the Fed that they might be nearing their rate-hiking cycle. In March, the Fed met to announce a 25 bps hike, a very basic increase, and Fed Chair Jerome Powell assured investors that the Fed is vigilant about the pressures it is putting on the economy.
With the recent and ongoing banking crisis, investors are currently anticipating no interest rate hike in the next Fed meeting. They are also not expecting interest rates to go down anytime soon, but such is the current state of the economy that even a rate pause would lift investor mood.
In such an eventuality, tech stocks are slated to make the most of the opportunity. They are already riding high on a fabulous January rally, and the S&P 500 Select Sector SPDR for technology is 9.7% in the green as of February. If rates do not go up any further, treasury yields would fall, and growth stocks would become more lucrative. Currently, there is no better sector tailor-made for “buy the dip” than technology.
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.
Black Oak Emerging Technology Fund (BOGSX - Free Report) usually invests the majority of its net assets in equity securities of emerging technology companies. BOGSX invests primarily in common stocks of companies that it considers well-positioned to become market leaders among emerging technology companies.
Robert D. Stimpson has been the lead manager of BOGSX since Apr 6, 2006. Three major holdings for the fund are 5.9% in Apple, 4.1% in KLA, and 4% in Kulicke & Soffa.
BOGSX’s 3-year and 5-year annualized returns are 17.1% and 13%, respectively. Its net expense ratio is 1.03% compared to the category average of 1.05%. BOGSX 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 Fund (KTCAX - Free Report) usually invests the majority of its net assets in common stocks of science and technology companies of any size. KTCAX focuses on one or more industries in the technology sector. The fund also invests in foreign securities and is non-diversified.
Sebastian P. Werner has been the lead manager of KTCAX since Nov 30, 2017. Three major holdings for the fund are 8.7% in Apple, 8.1% in Microsoft, and 7.4% in Alphabet.
KTCAX’s 3-year and 5-year annualized returns are 8.7% and 10.1%, respectively. Its net expense ratio is 0.89% compared to the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.
Janus Henderson Global Technology and Innovation Fund (JAGTX - Free Report) aims for the long-term growth of capital and specializes in technology. JAGTX 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. The fund offers a dividend annually.
Jonathan Cofsky has been the lead manager of JAGTX since Feb 28, 2022. Three major holdings for the fund are 12.8% in Microsoft, 6% in Apple, and 5.8% in ASML Holding.
JAGTX’s 3-year and 5-year annualized returns are 8% and 10.9%, respectively. Its net expense ratio is 0.90% compared to the category average of 1.05%. JAGTX has a Zacks Mutual Fund Rank #2.
Fidelity Advisor Technology Fund (FADTX - Free Report) seeks capital appreciation by investing the majority of its net assets in common stocks of companies principally engaged in processes or services that will provide or benefit significantly from technological advances and improvements. For its investment purposes, FADTX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FADTX since Jul 19, 2020. Three major holdings for the fund are 23.7% in Apple, 15.3% in Microsoft, and 5.6% in NVIDIA.
FADTX’s 3-year and 5-year annualized returns are 15.5% and 14.3%, respectively. Its net expense ratio is 0.97% compared to the category average of 1.05%. FADTX has a Zacks Mutual Fund Rank #2.
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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. Get it free >>