A Review of the Best Technology Mutual Funds for 2020
Take a Look at Some of the Best Mutual Funds That Invest in Technology
Investing in technology stocks can be a smart way to tap into what may be one of the best long-term growth opportunities in the stock market today. A smart way to tap into tech stocks is with mutual funds that concentrate their holdings in this growth sector. For help in finding the best technology funds for you, we review five technology mutual funds to buy in 2020.
What Are Technology Sector Funds?
A sector fund is a mutual fund or an exchange-traded fund (ETF) that invests primarily in one industrial sector of the economy. The technology sector includes technological businesses, such as manufacturers producing computer hardware or software, or electronics and technological service industry companies that provide information technology and business data processing.
Some examples of technology companies include Apple (AAPL), Microsoft (MSFT), Google (GOOG, GOOGL), and Facebook (FB).
Why Invest In Technology Mutual Funds?
Perhaps the greatest advantage of buying technology mutual funds is that investors can gain access and exposure to dozens or even hundreds of technology stocks in just one fund. Another advantage is that the investor doesn't have to spend time researching and analyzing individual stocks. Instead, the investor can buy a low-cost index fund or a top actively managed fund that concentrates its holdings in a number of technology stocks.
How We Found the Best Tech Sector Funds
There are dozens of technology mutual funds on the market today. To narrow our list down to just five technology funds, we used an online mutual fund research tool with a few key selection criteria:
- Expenses: We eliminated funds that charge loads and those that have high expense ratios (above 1.00%).
- Performance: To make our list of technology funds, we eliminated actively-managed funds that did not beat their target benchmark for 5- and 10-year returns. For index funds investing in technology, the performance will closely match that of its target benchmark.
Best Technology Sector Mutual Funds for 2020
Using the above selection criteria, and in no particular order, here are the best tech funds for 2020:
- Fidelity Select Technology (FSPTX): This may be the best choice overall if you're looking for an actively-managed technology fund. The performance for all the main time frames—1-, 3-, 5- and 10-year returns—places FSPTX significantly ahead of the average fund in the category of technology sector funds. The portfolio consists primarily of large-cap technology names like AAPL and MSFT. Expenses are reasonable at 0.72 percent.
- Columbia Global Technology Growth (CMTFX): This is a well-managed technology mutual fund that invests in tech stocks around the globe. Performance beats the technology category average in the 5- and 10-year returns and the expense ratio is 0.99%.
- Fidelity Select Semiconductors (FSELX): Investors wanting focused exposure to semi-conductor stocks may consider adding FSELX to their portfolio. Examples of FSELX top holdings include Intel Corp (INTC), Qualcomm (QCOM), and Nvidia (NVDA). Expenses for FSELX are 0.73 percent.
- Fidelity Select Software and IT Services (FSCSX): Another focused, specialty technology fund from Fidelity is FSCSX. It concentrates its holdings in the tech sub-sector of software and information technology. A commonly known example of a software provider is Microsoft (MSFT), and you might think of Salesforce.com (CRM) for information technology. Both of these are top holdings in FSCSX. The expense ratio is 0.72%.
- Vanguard Information Technology Index (VITAX): This tech sector fund from Vanguard will appeal to investors who want a low-cost, passively managed mutual fund. Some investors will be priced out of this fund with the minimum initial purchase requirement of $100,000. There's good news, however: A Vanguard ETF version (ticker VGT) has the same low expense ratio of 0.10 percent.
Technology stock mutual funds can be good investments for long-term investors with high tolerance for risk. This is because technology is an aggressive growth stock category, so potential investors should keep in mind that price volatility—ups and downs in value—can be more pronounced at times, compared to a broadly diversified fund like an S&P 500 Index fund.
The information on this site is provided for discussion purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.
Mutualfunds.com: "Top 178 Technology Equity Funds." Accessed January 31, 2020.