The tech sector was largely responsible for the market rally last year. However, tech stocks are on a bumpy ride this year owing to market volatility. The Nasdaq Composite Index is down year to date and entered correction territory earlier this month.
Rising rates have been the major reason behind the tech sector taking a beating. However, investors continue to bet on tech stocks given their growth prospect. Also, their track record of performing well even during the worst times make them a favorite. Hence, technology mutual funds are ideal for investors seeking long-term growth and impressive returns.
Tech stocks have been taking a beating lately as rising rates have been worrying investors. The Nasdaq Composite Index has lost 7.2% in the first three months of the year. This saw the index entering the correction territory earlier in March. Also, the Technology Select Sector SPDR (XLK) is down 7.7% year to date.
One of the major reasons behind the sector’s decline has been the rising benchmark 10-year Treasury yields, which went up as high as above 1.9% earlier this year after standing at 1.51% on Dec 31. This led to a blood bath in the market.
Even then, investors have been buying tech stocks. Interestingly, every time the markets have performed well this year, a tech rally has been responsible for it. This saw investors return to their favorite sector after the Technology Select Sector SPDR (XLK) rallied 2.7% and 1.7%, respectively, on Mar 28 and Mar 29.
Investors willing to be part of the tech rally can bet on some top-ranked technology funds like Fidelity Select Communication Services Portfolio FBMPX, Fidelity Select Computers Portfolio FDCPX and Fidelity Select Semiconductors Portfolio FSELX.
Moreover, technology stocks have played a key role during the pandemic. From helping the healthcare sector to keeping the retail sector alive, tech companies have been leading from the front.
In today's world, data management and storage have become critical components of healthcare. As a result of technical improvements in the healthcare sector, increased adoption of healthcare IT solutions, and the benefits of cloud computing usage in healthcare, the cloud computing industry is on the rise.
Besides, working and learning from home, which became a norm during the peak of the pandemic wouldn’t have been possible without the support from technology. This model of working and learning helped drive the sale of PCs, laptops and other kinds of computer peripherals.
Work from home, expanding digital payments, increased video streaming, and skyrocketing video game sales are among the other new normal trends that have evolved as a result of the health crisis, thus helping the tech sector.
Given this scenario, the sector is poised to perform well in the coming days too.
We have, thus, selected three mutual funds with significant exposure to the technology sector carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
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).
Fidelity Select Communication Services Portfolio fund aims for capital appreciation. FBMPX primarily invests most of its assets in securities of companies that are typically involved in the creation, production, or delivery of communication services. Fidelity Select Communication Services Portfolio fund invests in both domestic and international companies.
Fidelity Select Communication Services Portfolio fund has a track of positive total returns for over 10 years. Specifically, FBMPX’s returns over the three and five-year benchmarks are 17.4% and 12.7%, respectively. Fidelity Select Communication Services Portfolio fund has an annual expense ratio of 0.77%, which is below the category average of 0.89%. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Computers Portfolio fund seeks capital appreciation. FDCPX normally invests at least 80% of assets in common stocks of companies principally engaged in research, design, development, manufacture, or distribution of products, processes, or services that relate to currently available or experimental hardware technology within the computer industry.
Fidelity Select Computers Portfolio fund has a track of positive total returns for over 10 years. Specifically, FDCPX’s returns over the three and five-year benchmarks are 26.1% and 20.3%, respectively. Fidelity Select Computers Portfolio fund has an annual expense ratio of 0.74%, which is below the category average of 1.05%. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Semiconductors Portfolio fund aims for capital appreciation. As a non-diversified fund, FSELX invests the majority of its assets in securities of companies, principally engaged in the design, manufacturing or sale of semiconductors and semiconductor equipment.
Fidelity Select Semiconductors Portfolio has a track of positive total returns for over 10 years. Specifically, FSELX returns over the three and five-year benchmarks are 38.8% and 29.2%, respectively. Fidelity Select Semiconductors Portfolio fund has an annual expense ratio of 0.70%, which is below the category average of 1.05%. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
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