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4 Funds to Pick as the IoT Space Explodes

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The fourth industrial revolution brings along an amalgamation of technologies, from cloud computing to Artificial Intelligence (AI) and Internet of Things (IoT). Be it in the fields of medicine, manufacturing or business services, a network of connected devices is being used to control, monitor or collect data. Even at homes, computers and smartphones are being connected to home essentials like light bulbs, television, air conditioning to doorbells for security and comfort.

IoT has now become an integral part of our daily lives. This network of machines and computing devices has unique identifiers that have the ability to exchange data without human intervention. Hence, users can easily connect and personalize smart home devices and robots for security and controlling the home environment. In fact, rapid advancement in technology enables doctors to know about patients’ health with the help of wearables and run proper diagnosis before emergency situations.

Recently, IoT’s environmental sensors segment witnessed solid growth. This small equipment can be used in air pollution monitoring. Per a Research and Markets report, the global environmental monitoring market is expected to reach a worth of $25.95 billion by 2028 at a CAGR of 7.0%. Its operational flexibility, versatility, small equipment size, low maintenance cost and low space requirement are the key factors driving growth.

Rapid digital transformation has been boosting the IoT space of late but the pandemic has pushed adoption higher. In fact, development of wireless networking along with massive reduction in cost of connected devices, increase in adoption of cloud platform and rise in advanced data analytics has helped the IoT space explode. Per a Mordor Intelligence report, the global IoT market is estimated to reach a worth of $1,386.06 billion by 2026 from $761.4 billion in 2020, at a CAGR of 10.53%.

Additionally, growth is expected to be the highest in the industrial sector. With 5G deployment going on at a steady pace, 5G industrial IoT systems will offer next-generation wireless connectivity. with higher data transfer speed and lower latency in comparison to their predecessors. This in turn will boost business communication, emergency incident management, automation control and management, real-time workforce tracking and management, logistics and supply chain management, asset tracking and management, business process optimization, and predictive maintenance. A comprehensive research by Market Research Future reports stated that the 5G Industrial IoT market size is expected to surpass revenues of $8.9 billion by 2027, at a CAGR of 71.3%.

4 Fund Picks

IoT is constantly supporting digital transformation and is forming the backbone of the technology space. While pure-play IoT companies are rare, we have shortlisted four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) and have significant exposure to such companies.

Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.

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 Technology Portfolio FSPTX fund aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, this non-diversified fund that has returned 31.2% and 33.5% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSPTX has an annual expense ratio of 0.69%, which is below the category average of 1.05%.

Fidelity Select Semiconductors Portfolio FSELX fund aims for capital appreciation. The non-diversified fund invests majority of assets in securities of companies principally engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSELX has returned 34.2% and 34.8% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSELX has an annual expense ratio of 0.70%, which is below the category average of 1.05%.

Fidelity Select Software & IT Services Portfolio FSCSX aims for capital appreciation. The non-diversified fund invests majority of assets in common stocks of companies engaged in research, design, production or distribution of products or processes that relate to software or information-based services.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSCSX has returned 27.8% and 29.3% over the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCSX has an annual expense ratio of 0.70% versus the category average of 1.05%.

Franklin DynaTech Fund Class A FKDNX aims for capital appreciation. The fund invests primarily in common stocks and the fund manager focuses on companies that are leaders in innovation, take advantage of new technologies, have superior management, and benefit from new industry conditions.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, FKDNX has returned 28.9% and 29% over the past three- and five-year period, respectively. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.

FKDNX has an annual expense ratio of 0.85% versus the category average of 0.99%.

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