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5 Best-Performing Tech Mutual Funds of the Twenty-Tens

Nitish Marwah
Despite overvaluation concerns, the U.S. technology sector has had a stellar rally in the period between 2010 and so far in 2019, also popularly known as the twenty-tens.

Despite overvaluation concerns, the U.S. technology sector has had a stellar rally in the period between 2010 and so far in 2019, also 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 253.1% and 209.3%, respectively, in this time frame.

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.

The technology sector is benefiting from a continued strong digital transformation environment. 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 the overall growth of the sector.

Furthermore, if we consider the past five years alone, software has led the gains for the industry. Bellwether tech stocks such as Microsoft MSFT, Adobe ADBE and Salesforce CRM have been the best-performing stocks from the space. Also, payment companies such as Visa V, MasterCard MA and PayPal PYPL have also supported the industry’s top-line growth.

Technology Funds Provided Stellar Returns over the Past Decade

It is no myth that while tech mutual funds provide superior returns compared with other sectoral funds, they tend to be a tad more expensive. Per Morningstar’s most recent annual fee survey, the top-performing mutual funds from the space had above-average expense ratios compared with the broader market average.

The average expense ratio for tech mutual funds was 0.74% over the past 10 years, significantly higher than the industry’s average of 0.48%.  However, the median expense ratio for funds from the space across different share classes was 1.21%, lower than the 1.30% — the median for the broader market. Furthermore, the largest 20 technology mutual funds by assets under management (AUM) provided an average 10-year return of 19.8%, with an average expense ratio of 0.66%, relatively closer to the market average.

Industry experts believe that judicious allocation decisions by fund managers have supported gains for the sector’s mutual funds. Per Morningstar Direct data, with nearly $78 billion in combined AUM, the top tech mutual funds have returned an average 19% to 24% over the past 10 years.

5 Best Choices

We have, thus, highlighted five technology mutual funds that have provided stellar returns over the past 5 and 10-year period. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). 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 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 Global Technology T JAGTX fund invests a huge part of its assets in equity securities of those companies that are expected to gain from improvements or advancements 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.

JAGTXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.92%, which is below the category average of 1.29%. The fund has five and 10-year returns of 20.1% and 163.7%, respectively.

Fidelity Select Semiconductors FSELX fund 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.

FSELXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.73%, which is below the category average of 1.29%. The fund has five and 10-year returns of 22.5% and 159.8%, respectively.

Fidelity Select Software & IT Services Portfolio No Load FSCSX fund invests the 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.

FSCSXcarries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.72%, which is below the category average of 1.29%. The fund has five and 10-year returns of 20% and 147.6%, respectively.

Red Oak Technology Select ROGSX fund 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 carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.94%, which is below the category average of 1.29%. The fund has five and 10-year returns of 18.4% and 278.8%, respectively.

T. Rowe Price Global Technology PRGTX fund is a non-diversified fund that seeks to gain capital by investing at least 80% of its net assets in common stocks of companies that the fund’s manager believes will generate major revenues from advancements in technology. Usually, the fund aims to invest in at least five countries and allot 25% of its assets in businesses outside the United States.

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.

PRGTX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.91%, which is below the category average of 1.29%. The fund has five and 10-year returns of 21.8% and 104%, respectively.

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