The 7 Best Technology Mutual Funds to Buy explained by professional Forex trading experts the “ForexSQ” FX trading team.
The 7 Best Technology Mutual Funds to Buy
Investing in technology mutual funds can be a smart way to tap into what may be the best long-term growth bet of the century.
You don’t have to think too deeply or for very long to realize the greatest driving force behind the U.S. and world economies—technology. And the best way to tap into tech stocks is arguably with mutual funds that concentrate their holdings in this growth sector.
Technology Mutual Funds: Best Way to Invest in the Tech Sector
A sector fund is a mutual fund or exchange-traded fund (ETF for short) that invests primarily in one industrial sector of the economy.
Any list of sectors you find will usually include technology, financial, consumer cyclical, consumer staples, utilities, energy, natural resources, healthcare, real estate, and precious metals.
The technology sector is a category of stocks that contains technological businesses, such as manufacturers producing computer hardware, computer software or electronics and technological service industry companies, such as those providing information technology and business data processing. Some examples of technology companies include Apple (AAPL), Microsoft (MSFT), Google (GOOG, GOOGL) and Facebook (FB).
Perhaps the greatest advantage of buying technology mutual funds is that investors can gain access and exposure to dozens or hundreds of technology stocks in just one fund. Another advantage, as is the case with other mutual funds and ETFs, is that the investor does not need to spend time researching and analyzing individual stocks.
Instead, they can buy a low-cost index fund or a top actively-managed fund that concentrates its holdings in a number of technology stocks.
Best Technology Mutual Funds
To reduce your analysis and research time even further, we put together a list of the best technology mutual funds on the market today.
To arrive at our final list of seven technology funds, I eliminated funds that charge loads and those that have high expense ratios. I then looked at other key criteria, such as long-term performance record and manager tenure (for actively-managed funds).
So, without further ado, and in no particular order, here are the seven best technology mutual funds to buy:
- Fidelity Select Technology (FSPTX): Considering all of the primary factors for selecting the best technology funds, FSPTX may be the best overall mutual fund to buy, especially if you’re looking for an actively-managed fund. The performance for all of the main time frames to analyze—the 1-, 3-, 5- and 10-year returns—places FSPTX significantly ahead of the average fund in the category of technology sector funds. The manager, Charlie Chai, has been at the helm of FSPTX since January of 2007. The portfolio consists primarily of large-cap technology names like AAPL, FB, and GOOG. Expenses are reasonable at 0.77 percent, or $77 for every $10,000 invested, and the minimum initial investment is $2,500.
- T. Rowe Price Global Technology (PRGTX): If you’re looking for a diversified technology sector fund that invests in tech stocks around the world, PRGTX is an outstanding choice. Performance has historically outpaced major benchmarks, especially for the most important time periods, such as the 3-, 5-, and 10-year annualized returns. Expenses are 0.90 percent and the minimum initial investment is $2,500. Note: Like many actively-managed funds that are responsibly managed, PRGTX tends to close to new investors when assets grow large. Be sure to check the fund is open to new investors before making this fund your final selection!
- Columbia Global Technology Growth (CMTFX): Equally as compelling as PRGTX, CMTFX is a well-managed technology mutual fund that invests in tech stocks around the globe. Like the other technology funds on our list, CMTFX has a consistent track record of beating category averages. The expense ratio is 1.09 percent and the minimum initial investment is $2,000.
- Fidelity Select Semiconductors (FSELX): Fidelity offers a few high-quality technology funds that invest in niche areas of technology and FSELX is a standout. When computers and similar hardware devices are selling well, you’ll typically see stocks of firms that manufacture semiconductors performing well. Examples of FSELX top holdings include Intel Corp (INTC), Quallcom (QCOM), and Nvidia (NVDA). Expenses for FSELX are 0.77 percent and the minimum initial purchase is $2,500.
- Fidelity Select Software and IT Services (FSCSX): Another specialty technology fund from Fidelity to keep on your radar is FSCSX, which concentrates its holdings in the tech sub-sector of software and information technology. A famous example of software is Microsoft (MSFT) and for information technology, you might think of Salesforce.com (CRM). Both of these are top holdings in FSCSX. Short-term performance for FSCSX is not consistent but the long-term performance (10-year annualized return) is better than over 90 percent of technology mutual funds. The expense ratio is 0.76 percent and the minimum initial purchase is $2,500.
- Vanguard Information Technology Index (VITAX): This tech sector fund from Vanguard will appeal to wealthy investors that want a low-cost, passively-managed mutual fund. With a minimum initial purchase of $100,000 the everyday investors will be priced out of this gem of fund. However, there is good news for Vanguard funds that love index funds: There is an ETF version (ticker: VGT) that has the same low expense ratio of 0.10 percent.
- Blackrock Science and Technology Opportunities (BGSAX): Yes, BGSAX does have a front load but Blackrock offers a load-waived version of the fund, often found in 401(k) plans. With that formality out of the way, BGSAX shares all of the qualities of our top technology funds with exception of the expense ratio is a bit high at 1.45 percent. However, if you are able to buy one of the share classes with lower expenses, BGSAX is an outstanding technology mutual fund.
Investors Best Suited for Technology Mutual Funds
Since technology is an aggressive growth stock category, potential investors should keep in mind that price volatility (ups and downs in value) can at times be more pronounced than a more diversified fund like an S&P 500 Index fund. But along with greater risk, higher potential returns are possible. Therefore, investors thinking of buying a technology fund should be willing to accept fluctuations in their account balance.
The 7 Best Technology Mutual Funds to Buy Conclusion
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