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4 Top Tech Funds to Ride the Strong Q1 Rally

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The technology sector’s prominent rebound in the first quarter has been the center of attraction for tech-enthusiastic investors. This impressive bounce back was prompted by a rally in semiconductor stocks, FAANG stocks’ remarkable price performances and substantial progress in U.S.-China trade talks. 

In fact, the Technology Select Sector SPDR (XLK) has returned 22.4% so far this year, significantly outpacing the S&P 500’s rally of 14.8%. The recovery in technology stocks has also boosted the tech-laden Nasdaq Composite index, which has gained 19.2% since Jan 1.

Tech equities may have incurred a setback in late 2018, but the tailwinds driving the sector in 2019 are strong. The rebound in the semiconductor industry, in particular, helped the sector post stellar gains. The chip-making industry had registered a rather lackluster performance in the fourth quarter, mostly due to the economic slowdown in China and trade tensions. However, the iShares PHLX Semiconductor Index has gained 26.9% on a year-to-date basis.

This revival in the semiconductor industry is mostly because of increased chip demand, jump in activity in the data center segment and a slew of technological trends like Internet of Things, high-end gaming and 5G wireless. A rebound in China’s manufacturing activity and encouraging trade talks are also boosting the industry.

Second, a rebound in FAANG stocks in the first quarter promptly gave the technology sector a push. FAANG stocks have gained more than 15% so far this year, with Netflix registering highest gains, up 36.3%. This remarkable recovery boosted the overall technology sector.

Third, rapid implementation of technology in other sectors such as aerospace, defense, healthcare, and banking to name a few is helping the tech sector to register unparalleled growth. Given the growth prospects and positive developments in the technology arena, it would be prudent to pick mutual funds that invest in technology companies. But why invest in funds and not stocks?

This is because mutual funds tone down the level of risks generally associated with stock market investments. In addition, reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are alsowhy one should be parking money in mutual funds(read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Our Choices

We have selected a few technology mutual funds that you could consider adding to your portfolio. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) seeks capital appreciation by primarily investing in common stocks. The non-diversified fund usually invests the majority of its net assets in securities of companies that are engaged in operations in the software or information-based services industry. The fund invests in U.S. and non-U.S. companies alike.

This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCSX carries a Zacks Rank #1 and has an annual expense ratio of 0.73%, which is below the category average of 1.31%. The fund has three and five-year returns of 24.1% and 17.4%, respectively. FSCSX has a minimum initial investment of $2500.

Invesco Technology Fund Class Y (ITYYX - Free Report) seeks long-term capital growth. The fund invests a minimum of 80% of its net assets in securities of companies that are engaged in operations in the technology-related industries. This fund mostly invests in common stocks of companies.

This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

ITYYX carries a Zacks Rank #2 and has an annual expense ratio of 1.03%, which is below the category average of 1.31%. The fund has three and five-year returns of 19.6% and 12.6%, respectively. ITYYX has a minimum initial investment of $1000.

T. Rowe Price Global Technology Fund (PRGTX - Free Report) aims for long-term capital growth. The fund invests the majority of its net assets in common stocks of companies that the fund’s managers expect will generate most of their revenues from technology development, advancement and usage. PRGTX is a non-diversified fund.

This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRGTX carries a Zacks Rank #2 and has an annual expense ratio of 0.89%, which is below the category average of 1.31%. The fund has three and five-year returns of 21.5% and 19.4%, respectively. PRGTX has a minimum initial investment of $2500.

Columbia Seligman Communications and Information Fund Advisor Class (SCIOX - Free Report) mostly invests in securities of companies that operate in communications, information and related industries. SCIOX also invests in companies in the media industry. The non-diversified fund primarily aims for providing its shareholders with capital gain.

This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

SCIOX carries a Zacks Rank #2 and has an annual expense ratio of 0.98%, which is below the category average of 1.31%. The fund has three and five-year returns of 19.8% and 18.1%, respectively. SCIOX has no minimum initial investment.

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