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With the end of another decade, economists believe that the U.S. tech sector is on the cusp of a major revolution. Despite overvaluation concerns, the U.S. technology sector has had a stellar rally between 2010 and 2019, popularly known as the twenty-tens.
To put it into perspective, two of the industry’s most-widely tracked indices, the Technology Select Sector SPDR Fund (XLK) and Vanguard Information Technology Index Fund ETF Shares (VGT), have returned 252.7% and 282.9%, respectively, in this time frame.
The technology sector is benefiting from continued digital transformation. The last few years have witnessed a series of breakthroughs in cloud computing, predictive analytics, AI, self-driving vehicles, digital personal assistants and IoT, which have, in ways more than one, contributed to overall growth of the sector.
As a result, investors have shed their inhibitions and increasingly ventured into tech. This is a good sign for the sector as investing in innovation has historically been considered risky and less rewarding.
As a matter of fact, Seth Bannon, a Founding Partner at Fifty Years, believes that, “established funds will spin up deep tech teams and more funds will be founded to address this market, especially where deep tech meets sustainability.”
Research consultancy firm, IDC, estimates that the global information technology space is on track to hit $5.2 trillion this year. Also, the United States, the largest tech market in the world in terms of share, constituting about 32% of the total market, is on track to reach $1.7 trillion in 2020.
Per a Cyberstates report, the economic impact of America’s tech sector, when measured as a percentage of GDP, exceeds that of extremely rewarding sectors such as retail, construction and transportation.
Risk lovers seeking healthy returns over a fairly long investment horizon may opt for technology mutual funds. It is believed that the technology sector is poised for better earnings performance than other sectors due to greater demand for technology and innovation.
Longest Bull Run in History
The current phase of stock market rally, which began around March 2009, is the best in history. The Nasdaq alone has total returns of more than 500% from lows the market had hit in 2009.
The bull market turned 10 this year in March and Wall Street pundits expect the rally to continue in 2020 on an accommodative monetary policy adopted by the Federal Reserve as well as strong fundamentals of the U.S. economy.
Notably, this is also the longest phase of economic expansion in U.S. history, now in its 11th year. The current cycle of economic expansion, which began around June 2009, has easily outdone the record 120-month expansion between March 1991 and March 2001, per the National Bureau of Economic Research.
Economists have attributed this to President Trump’s landmark tax cut in 2018 as well as supportive business regulations.
4 Best Choices
We have, thus, highlighted four technology mutual funds that have provided stellar returns over the past 5 and 10-year periods. Each of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform 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 success of the fund.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without multiple commission charges that are associated with stock purchases are the primary reasons why investors should park their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Janus Henderson Global Technology Fund Class T (JAGTX - Free Report) invests a huge part of its assets in equity securities of those companies that are expected to gain from improvement or advancement in technology. JAGTX seeks capital appreciation for the long run and invests in both domestic and foreign companies with stable growth potential. It generally invests in companies from different nations, including the United States.
This Sector - Tech product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JAGTX has an annual expense ratio of 0.92%, which is below the category average of 1.30%. The fund has five and 10-year returns of 19.1% and 17.9%, respectively.
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests the bulk of its assets in common stocks of companies involved in the manufacture, design and sale of electronic equipment and components. FSELX seeks growth of capital. The fund invests in both U.S. companies and non-U.S. companies.
This Sector - Tech product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSELX has an annual expense ratio of 0.73%, which is below the category average of 1.30%. The fund has five and 10-year returns of 20.8% and 19.7%, respectively.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests majority of its assets in companies whose primary operations are related to software or information-based services. It primarily focuses on acquiring common stocks of both domestic and foreign companies.
This Sector - Tech product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCSX has an annual expense ratio of 0.72% versus the category average of 1.30%. The fund has five and 10-year returns of 19.3% and 19.5%, respectively.
Red Oak Technology Select Fund (ROGSX - Free Report) invests 80% of its assets in securities of companies engaged in the technology sector. The fund invests in both U.S. and non-U.S. stocks.
This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
ROGSX has an annual expense ratio of 0.94%, below the category average of 1.30%. The fund has five and 10-year returns of 17% and 17.4%, respectively.
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4 Best Tech Mutual Funds for 2020
With the end of another decade, economists believe that the U.S. tech sector is on the cusp of a major revolution. Despite overvaluation concerns, the U.S. technology sector has had a stellar rally between 2010 and 2019, popularly known as the twenty-tens.
To put it into perspective, two of the industry’s most-widely tracked indices, the Technology Select Sector SPDR Fund (XLK) and Vanguard Information Technology Index Fund ETF Shares (VGT), have returned 252.7% and 282.9%, respectively, in this time frame.
The technology sector is benefiting from continued digital transformation. The last few years have witnessed a series of breakthroughs in cloud computing, predictive analytics, AI, self-driving vehicles, digital personal assistants and IoT, which have, in ways more than one, contributed to overall growth of the sector.
As a result, investors have shed their inhibitions and increasingly ventured into tech. This is a good sign for the sector as investing in innovation has historically been considered risky and less rewarding.
As a matter of fact, Seth Bannon, a Founding Partner at Fifty Years, believes that, “established funds will spin up deep tech teams and more funds will be founded to address this market, especially where deep tech meets sustainability.”
Research consultancy firm, IDC, estimates that the global information technology space is on track to hit $5.2 trillion this year. Also, the United States, the largest tech market in the world in terms of share, constituting about 32% of the total market, is on track to reach $1.7 trillion in 2020.
Per a Cyberstates report, the economic impact of America’s tech sector, when measured as a percentage of GDP, exceeds that of extremely rewarding sectors such as retail, construction and transportation.
Risk lovers seeking healthy returns over a fairly long investment horizon may opt for technology mutual funds. It is believed that the technology sector is poised for better earnings performance than other sectors due to greater demand for technology and innovation.
Longest Bull Run in History
The current phase of stock market rally, which began around March 2009, is the best in history. The Nasdaq alone has total returns of more than 500% from lows the market had hit in 2009.
The bull market turned 10 this year in March and Wall Street pundits expect the rally to continue in 2020 on an accommodative monetary policy adopted by the Federal Reserve as well as strong fundamentals of the U.S. economy.
Notably, this is also the longest phase of economic expansion in U.S. history, now in its 11th year. The current cycle of economic expansion, which began around June 2009, has easily outdone the record 120-month expansion between March 1991 and March 2001, per the National Bureau of Economic Research.
Economists have attributed this to President Trump’s landmark tax cut in 2018 as well as supportive business regulations.
4 Best Choices
We have, thus, highlighted four technology mutual funds that have provided stellar returns over the past 5 and 10-year periods. Each of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform 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 success of the fund.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without multiple commission charges that are associated with stock purchases are the primary reasons why investors should park their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Janus Henderson Global Technology Fund Class T (JAGTX - Free Report) invests a huge part of its assets in equity securities of those companies that are expected to gain from improvement or advancement in technology. JAGTX seeks capital appreciation for the long run and invests in both domestic and foreign companies with stable growth potential. It generally invests in companies from different nations, including the United States.
This Sector - Tech product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JAGTX has an annual expense ratio of 0.92%, which is below the category average of 1.30%. The fund has five and 10-year returns of 19.1% and 17.9%, respectively.
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests the bulk of its assets in common stocks of companies involved in the manufacture, design and sale of electronic equipment and components. FSELX seeks growth of capital. The fund invests in both U.S. companies and non-U.S. companies.
This Sector - Tech product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSELX has an annual expense ratio of 0.73%, which is below the category average of 1.30%. The fund has five and 10-year returns of 20.8% and 19.7%, respectively.
Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests majority of its assets in companies whose primary operations are related to software or information-based services. It primarily focuses on acquiring common stocks of both domestic and foreign companies.
This Sector - Tech product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCSX has an annual expense ratio of 0.72% versus the category average of 1.30%. The fund has five and 10-year returns of 19.3% and 19.5%, respectively.
Red Oak Technology Select Fund (ROGSX - Free Report) invests 80% of its assets in securities of companies engaged in the technology sector. The fund invests in both U.S. and non-U.S. stocks.
This Zacks sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
ROGSX has an annual expense ratio of 0.94%, below the category average of 1.30%. The fund has five and 10-year returns of 17% and 17.4%, respectively.
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 >>