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3 Tech Mutual Funds to Buy as Fed Pauses Rate Hike
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Federal Reserve recently announced its decision to keep interest rates unchanged, maintaining the range between 5.25% and 5.5%.
The Fed made the decision based on revised economic growth projections, which have taken a notably optimistic turn. Gross Domestic Product (GDP) is now expected to surge by a robust 2.1% for the current year. This upward revision reflects the Federal Reserve's strong confidence in the economy's direction and its belief that a recession is not imminent.
Consumer behavior plays a crucial role in maintaining this confidence. With consumers driving about two-thirds of economic activity, their resilience is truly remarkable. They continue to spend even in the face of challenges like escalating energy costs and the resumption of student loan repayments. This unwavering spending underscores the prevailing strength of consumer sentiment, as evidenced by sustained levels, despite decreasing savings. Recent data from Federal Reserve Bank of New York reveals that credit card debt has already surpassed $1 trillion.
Additionally, the labor market's performance provides another reason for optimism. Initial jobless claims have significantly dropped since late January, a clear sign that the labor market remains exceptionally tight. In the week ending Sep16, first-time filings totaled a seasonally adjusted 201,000, well below the Dow Jones estimate of 225,000 and marking a notable decrease of 20,000 from the previous week. Continuing claims also declined, totaling 1.662 million. These labor market indicators further underscore the strength and resilience of the broader economy.
All these economic indicators make the technology sector an attractive investment choice. Higher interest rates typically exert pressure on tech companies’ future cash flows, limiting their ability to invest in innovation and impeding their growth potential. This is because rising interest rates make borrowing more expensive for tech firms, leading to increased cash outflows and potential losses. With the overall economic outlook showing signs of improvement, technology mutual funds offer a potential path to long-term growth and stability in these uncertain times.
From an investment standpoint, we have selected three tech mutual funds, which are expected to hedge one's portfolio against any economic downturn and provide attractive returns. Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These mutual funds, by the way, 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 Select Semiconductors Portfolio Fund (FSELX - Free Report) seeks capital appreciation. FSELX invests most of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. Most of the fund's holdings were in companies like NVIDIA Corp. (32.2%), Marvell Technology, Inc. (8.3%), and NXP Semiconductors N.V. (8.1%) as of May 31, 2023.
FSELX's 3-year and 5-year returns are 30.4% and 27.6%, respectively. The annual expense ratio is 0.69% compared with the category average of 1.05%. FSELX 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.
T. Rowe Price Science and Technology Fund (PRSCX - Free Report) seeks long-term capital growth by investing in common stocks of companies expected by T. Rowe Price to benefit from the development, advancement, and use of science and technology. PRSCX advisors invest in foreign stocks, futures and options.
Kennard W. Allen has been the lead manager of PRSCX since Dec 31, 2008. Most of the fund's holdings were in companies like Microsoft Corp. (10.8%), Alphabet Inc. (5.3%) and Salesforce, Inc. (5.1%) as of Jun 30, 2023.
PRSCX's 3-year and 5-year returns are 4.4% and 11.7%, respectively. The annual expense ratio is 0.82% compared with the category average of 1.05%. PRSCX has a Zacks Mutual Fund Rank #1.
DWS Science and Technology Fund (KTCAX - Free Report) seeks capital appreciation by investing most of its assets in common stocks of U.S. companies in the technology sector. KTCAX advisors use in-depth research to select a diverse portfolio of technology companies with robust and sustainable earnings growth, large and growing markets, leading products and services, and strong balance sheets.
Sebastian P. Werner has been the lead manager of KTCAX since Nov 30, 2017. Most of the fund's holdings were in companies like Microsoft Corp. (8.2%), NVIDIA Corp. (8%) and Apple Inc. (7.7%) as of Apr 30, 2023.
KTCAX's 3-year and 5-year returns are 6.5% and 13.8%, respectively. The annual expense ratio is 0.91% compared with the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.
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3 Tech Mutual Funds to Buy as Fed Pauses Rate Hike
Federal Reserve recently announced its decision to keep interest rates unchanged, maintaining the range between 5.25% and 5.5%.
The Fed made the decision based on revised economic growth projections, which have taken a notably optimistic turn. Gross Domestic Product (GDP) is now expected to surge by a robust 2.1% for the current year. This upward revision reflects the Federal Reserve's strong confidence in the economy's direction and its belief that a recession is not imminent.
Consumer behavior plays a crucial role in maintaining this confidence. With consumers driving about two-thirds of economic activity, their resilience is truly remarkable. They continue to spend even in the face of challenges like escalating energy costs and the resumption of student loan repayments. This unwavering spending underscores the prevailing strength of consumer sentiment, as evidenced by sustained levels, despite decreasing savings. Recent data from Federal Reserve Bank of New York reveals that credit card debt has already surpassed $1 trillion.
Additionally, the labor market's performance provides another reason for optimism. Initial jobless claims have significantly dropped since late January, a clear sign that the labor market remains exceptionally tight. In the week ending Sep16, first-time filings totaled a seasonally adjusted 201,000, well below the Dow Jones estimate of 225,000 and marking a notable decrease of 20,000 from the previous week. Continuing claims also declined, totaling 1.662 million. These labor market indicators further underscore the strength and resilience of the broader economy.
All these economic indicators make the technology sector an attractive investment choice. Higher interest rates typically exert pressure on tech companies’ future cash flows, limiting their ability to invest in innovation and impeding their growth potential. This is because rising interest rates make borrowing more expensive for tech firms, leading to increased cash outflows and potential losses. With the overall economic outlook showing signs of improvement, technology mutual funds offer a potential path to long-term growth and stability in these uncertain times.
From an investment standpoint, we have selected three tech mutual funds, which are expected to hedge one's portfolio against any economic downturn and provide attractive returns. Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These mutual funds, by the way, 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 Select Semiconductors Portfolio Fund (FSELX - Free Report) seeks capital appreciation. FSELX invests most of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. Most of the fund's holdings were in companies like NVIDIA Corp. (32.2%), Marvell Technology, Inc. (8.3%), and NXP Semiconductors N.V. (8.1%) as of May 31, 2023.
FSELX's 3-year and 5-year returns are 30.4% and 27.6%, respectively. The annual expense ratio is 0.69% compared with the category average of 1.05%. FSELX 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.
T. Rowe Price Science and Technology Fund (PRSCX - Free Report) seeks long-term capital growth by investing in common stocks of companies expected by T. Rowe Price to benefit from the development, advancement, and use of science and technology. PRSCX advisors invest in foreign stocks, futures and options.
Kennard W. Allen has been the lead manager of PRSCX since Dec 31, 2008. Most of the fund's holdings were in companies like Microsoft Corp. (10.8%), Alphabet Inc. (5.3%) and Salesforce, Inc. (5.1%) as of Jun 30, 2023.
PRSCX's 3-year and 5-year returns are 4.4% and 11.7%, respectively. The annual expense ratio is 0.82% compared with the category average of 1.05%. PRSCX has a Zacks Mutual Fund Rank #1.
DWS Science and Technology Fund (KTCAX - Free Report) seeks capital appreciation by investing most of its assets in common stocks of U.S. companies in the technology sector. KTCAX advisors use in-depth research to select a diverse portfolio of technology companies with robust and sustainable earnings growth, large and growing markets, leading products and services, and strong balance sheets.
Sebastian P. Werner has been the lead manager of KTCAX since Nov 30, 2017. Most of the fund's holdings were in companies like Microsoft Corp. (8.2%), NVIDIA Corp. (8%) and Apple Inc. (7.7%) as of Apr 30, 2023.
KTCAX's 3-year and 5-year returns are 6.5% and 13.8%, respectively. The annual expense ratio is 0.91% compared with the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.
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 >>