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3 Funds to Make the Most of Cloud Computing Revolution

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Cloud computing has revolutionized the way enterprises perform their businesses today. The technology also pushes customer demand for faster, more agile and efficient systems and applications.

Therefore, mutual fund investors who seek to make the most of the ongoing revolution in cloud computing could do well to buy funds that have exposure to such companies that are invested in cloud computing.

Promising Outlook for the Cloud Computing Market

According to a MarketsandMarkets report, the global cloud computing market is expected to turn to $623.3 billion by 2023 from $272 billion in 2018, witnessing a CAGR of 18%.

One of the major reasons behind such growth is that companies around the world are fast adopting cloud computing services. After all, cloud systems and applications offer more automation and agility along with the ability to deliver better customer experience.

Cloud is Boosting Business Operations

Cloud computing is transforming businesses by allowing them to focus on other crucial operations than manage servers. Many start-ups today are using cloud to save on infrastructure and overhead costs, thereby expanding without concerning themselves with infrastructure-related expenses.

In fact, a cloud service provider offers better customer support through its easy-to-navigate set of applications. Since employees can access the same information anytime from any location, it leads to improved customer service. Revamped software architectures and improved business computing make this possible.

Secondly, a cloud-based system also offers secure data storage, offering end-to-end security to clients. The multiple layers of security and constant upgrades protect systems against cyber-attacks and data breach.

Speaking of cloud computing segments, the hybrid cloud segment is expected to contribute the most to the cloud computing market’s growth in 2018-2023. This is because industries such as healthcare, banking and financial services, and government agencies, which require strict compliance, security and customer experience, opt for the hybrid deployment model.  

In fact, prominent cloud vendors such as IBM and Google are focusing on improving to gain a stronger foothold in the hybrid cloud space. For example, IBM acquired Red Hat, which offers open source software products, in October 2018. Google, on the other hand, has a 2023 goal to beat Microsoft and Amazon and become the top cloud player, per a report by The Information.

As more companies migrate to cloud platforms, cloud infrastructure, applications and service providers such as Microsoft, Google, Adobe, Salesforce, Oracle and Hewlett Packard are likely to witness the growth of substantial opportunities through their services. 

3 Funds to Buy

We have, therefore, selected three mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and invest in companies that could gain most from the advancement and investments in cloud computing. All of these funds have returned more than 30% to investors on a year-to-date basis. In addition, 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.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are 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).

DWS Science and Technology Fund - Class A (KTCAX - Free Report) aims for capital growth. The fund invests the majority of its assets in common stocks of science and technology companies. KTCAX is a non-diversified fund. Some of the fund’s top holdings are Microsoft Corp, Alphabet Inc A and Salesforce.com Inc.

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.

KTCAX carries a Zacks Rank #1 and has an annual expense ratio of 0.93%, which is below the category average of 1.30%. It has returned 37.8% on a year-to-date basis. KTCAX has a minimum initial investment of $1000.

Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) fund invests the majority of its assets in companies that operate in software or information-based services. The fund seeks capital appreciation. FSCSX is a non-diversified fund that invests in U.S. and foreign companies alike. Some of the fund’s top holdings are Microsoft Corp, Adobe Inc and Salesforce.com Inc.

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 0.72%, which is below the category average of 1.30%. It has returned 36.3% on a year-to-date basis. FSCSX has no minimum initial investment.

Fidelity Select Computers Portfolio (FDCPX - Free Report) fund aims for growth of capital. The fund invests the majority of its assets in companies that operate in experimental hardware technology within the computer industry. FDCPX primarily invests in common stocks of companies. The non-diversified fund invests in both U.S. and non-U.S. companies. Some of the fund’s top holdings are Apple Inc, HP Inc and Hewlett Packard Enterprise Co.  

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.

FDCPX carries a Zacks Rank #2 and has an annual expense ratio of 0.77%, which is below the category average of 1.30%. It has returned 30.4% on a year-to-date basis. FDCPX has no minimum initial investment.

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