FDYZX Versus PGTAX: Which Fund Should You Bet On?

Technology mutual funds are ideal for investors seeking long-term growth and impressive returns. Improving industry fundamentals and emerging technologies such as AI, ML, robotics and data science are the key catalysts to the sector’s growth.

In addition, the majority of funds investing in securities from the technology sector take a growth-oriented approach that includes focusing on companies with strong fundamentals and a relatively better investment prospect. Moreover, technology has come to have a broader meaning than just hardware and software. Social media and Internet companies are now part of the technology landscape.

The U.S. technology sector has been the best performer so far this year, backed especially by the work-from-home trend due to social distancing to curb the spread of COVID-19. The Technology Select Sector SPDR Fund (XLK) has gained 25.4% year to date.

Under such circumstances, investing in technology mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can be cumbersome. To that end, let us find out which of the two funds discussed below is better.

Franklin DynaTech Fund Advisor Class FDYZX

The fund seeks appreciation of capital by investing primarily in common stocks. FDYZX invests a major portion of its assets in equity securities issued by companies, which are believed to be leaders in innovation and benefiting from new industry conditions. The fund may invest in both domestic and foreign companies.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 24.9% over the 3-year and 19.8% 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.

Franklin DynaTech Fund Advisor Class, as of the last filing, allocates its assets in the top two major groups; Large Growth and High Yield Bond. Further, as of the last filing, Amazon.com Inc., Microsoft Corp., and Alphabet Inc. were the top holdings for FDYZX.

Sporting a Zacks Mutual Fund Rank #1 (Strong Buy), FDYZX was incepted in November 2010 and is managed by Franklin/Temp. The fund carries an expense ratio of 0.61% and requires a minimal initial investment of $0.

Putnam Global Technology Fund Class A PGTAX

This fund aims for capital growth. It mostly invests in common stocks of medium- and large-capitalization companies that operate in the technology sector. This is a non-diversified fund.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the 3 and 5-year benchmarks are 26.2% and 25.1%, respectively. To see how this fund performed compared in its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Putnam Global Technology Fund Class A, as of the last filing, allocates its assets in the top two major groups; Large Growth and Emerging Market. Further, as of the last filing, Microsoft Inc., Visa Inc. and Adobe Systems Inc. were the top holdings for PGTAX.

This Zacks Rank #1 fund was incepted in January 2009 and carries an expense ratio of 1.16%. It requires a minimal initial investment of $500 and is managed by Putnam Funds.

To Conclude

While both FDYZX and PGTAX carry a Zacks Mutual Fund Rank #1, upon having a closer look, we find that the latter is a clear winner. Despite PGTAX’s administrative and other operating expenses being higher than FDYZX’s, the former has a history of providing higher and consistent returns. In Q2 2020 alone, PGTAX returned 36.7% compared to 35.1% returned by FDYZX.

Also, FDYZX has returned 21.8% year to date compared with 26.1% returned by PGTAX. Meanwhile, PGTAX also offers lower risk compared to FDYZX. While PGTAX has a 3-year beta of 1.02, FDYZX’s is 1.04. So it is only fair to conclude that PGTAX is worth buying, given its higher returns and comparably lower inherent risk.

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