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Which Communications Fund to Buy: PRMTX or FTUAX?

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The communications industry is clearly gearing up despite the pandemic and stay-at-home orders that have been plaguing the world over the past couple of months. As the United States opens up its economy slowly, one is only likely to witnesses the industry gathering steam.

Of course, the pandemic led to more use of communication channels, as people switched to working from home and connecting via phone and Internet services. In addition, indoor entertainment options such as streaming services and online games also found more popularity and witnessed a surge in user base.

Second, communication services has been the third-highest gaining sector of the S&P 500 Index over the past year, indicating significant demand for the industry’s products and services. After all, the sector has gained 6.8% over the past one year compared to the broader sector’s 3.3% gain. In addition, the sector added 8.1% over the past month, when broader markets were undergoing high volatility due to the pandemic-triggered lockdown and gained only 2.8%.

This is why investing in mutual funds from the communications industry is prudent right now. Let us compare two well-ranked funds from this space, PRMTX and FTUAX. The former carries a Zacks Mutual Fund Rank #1 (Strong Buy) and the latter carries a Zacks Mutual Fund Rank #2 (Buy). Let us find out which is the best fund for investment purposes.

T. Rowe Price Communications & Technology Fund Investor Class (PRMTX - Free Report)

The fund aims for capital growth over a long period. It invests the majority of its assets in securities of communications and technology companies. The non-diversified fund invests in both U.S. and non-U.S. companies alike.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 17% over the 3-year and 16.3% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here

T. Rowe Price Communications & Technology Fund Investor Class, as of the last filing, allocates its assets in top two major groups — Large Growth and Precious Metal. Further, as of the last filing, Amazon.com Inc, American Tower Corp and T-Mobile US Inc were the top holdings for PRMTX.

PRMTX was incepted on Oct 13, 1993 and is managed by T. Rowe Price. The fund carries an expense ratio of 0.76% and requires a minimal initial investment of $2500.

Fidelity Advisor Telecommunications Fund Class A (FTUAX - Free Report)

The fund aims for capital appreciation. It invests the majority of its assets in securities of companies engaged in activities in the telecommunication sector. The non-diversified fund invests in mostly common stocks of companies.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 2.8% over the 3-year and 5.5% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here

Fidelity Advisor Telecommunications Fund Class A, as of the last filing, allocates its assets in top two major groups — Large Growth and Large Value. Further, as of the last filing, Verizon Communications Inc, AT&T Inc and T-Mobile US Inc. were the top holdings for FTUAX.

FTUAX was incepted on Dec 12, 2006 and is managed by Fidelity. The fund carries an expense ratio of 1.18% and requires a minimal initial investment of $0.

To Conclude

Taking a closer look at PRMTX and FTUAX, we find that the former clearly beats the latter in terms of returns and expense ratio. Of course, PRMTX is much more expensive compared to FTUAX and the former has higher risk associated with it (PRMTX has a beta of 0.91 against FTUAX’s beta of 0.61). But the former compensates pretty well in terms of returns and lower management fees. Finally, PRMTX carries the top Zacks Mutual Fund Rank, which is indicative of its better position.

This is why mutual fund investors, who wish to delve into higher risk, may consider investing in PRMTX.

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