The technology sector saw strong gains in 2023, mainly due to the boom in artificial intelligence and related sectors. The tech-heavy Nasdaq Composite Index has given investors a 30.5% year-to-date gain compared to the S&P 500, while the Dow Jones Industrial Average has given investors gains of 24.2% and 13.3%, respectively.
The Nasdaq 100 Technology Sector Index rose 65.4% over the same period. Investors who parked their money in tech stocks during the post-pandemic period of high inflation are reaping attractive returns.
Technology companies are generally sensitive to interest rates because they constantly need to develop. Expenditures are high due to research and development and other related costs. The US Federal Reserve (Fed) has been aggressively tightening monetary policy to combat inflation, leading to higher borrowing costs. This is impacting the profitability of technology companies.
The U.S. Federal Reserve left interest rates unchanged at its last policy meeting and signaled a rate cut in 2024 as inflation is heading into a favorable zone. The annual increase rate of the consumer price index in November was 3.1% compared to the previous year. Monthly rates increased modestly by 0.1% from October to November, primarily due to higher rental costs.
The US economy remains resilient, with third-quarter GDP growth of 5.2%, beating street expectations of 4.9%. Although the Fed’s 2% inflation target is still far from being achieved, given current conditions, the Fed will most likely ease its monetary policy outlook in the near future.
Therefore, the future of the technology industry remains optimistic. New waves such as regenerative artificial intelligence, machine learning, cloud computing, the Internet of Things, and robotics are also expected to drive growth for tech stocks. For better returns in the long run, it would be wise to invest in mutual funds that hold high-tech companies.
Therefore, three of the lowest under management stocks boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive year-to-date, three- and five-year annualized returns, have a minimum initial investment of $5,000 or less, and are I chose mutual funds. The expense ratio is above the category average of 1.05%. In particular, mutual funds generally reduce transaction costs and diversify portfolios, primarily without the series of fees associated with purchasing stocks (Read more: Mutual Funds: Advantages, Disadvantages, and Give Investors Money (how to earn money).
Fidelity Select Semiconductors Portfolio FSELX invests the majority of its assets in the common stock of domestic and foreign companies primarily engaged in the design, manufacture and sale of semiconductors and semiconductor equipment. FSELX Advisors make investment decisions based on fundamental analytical factors such as financial health, industry standing, and market and economic conditions.
Adam Benjamin has been the Principal Manager of FSELX since March 15, 2020. The fund invested 24.8% in NVIDIA, 8.4% in NXP Semiconductors, 8% in ON Semiconductor, and 8% in other technology companies as of August 31, 2023.
As of November 30, 2023, FSELX’s year-to-date, three-year, and five-year annualized returns are approximately 64.3%, 20.9%, and 29.8%, respectively. FSELX has an annual expense ratio of 0.68%.
Click here to see how this fund performed compared to its category and other #1 and #2 ranked mutual funds.
Red Oak Technology Select ROGSX invests most of its net assets in stocks of domestic companies operating in the technology sector, based on the judgment of the fund’s advisor. ROGSX Advisors may also invest in equity REITs, common stocks of foreign companies, and American Depositary Receipts.
Robert D. Stimpson has served as Principal Manager of ROGSX since January 16, 2019. The fund invested 7.4% in Microsoft, 6.8% in Apple, and 6.4% in KLA, among various other technology companies, as of July 31, 2023.
As of November 30, 2023, ROGSX’s year-to-date, three-year, and five-year annualized returns are 41.6%, 8.4%, and 13.8%, respectively. ROGSX has an annual expense ratio of 0.94%.
DWS Science and Technology The KTCSX Fund invests most of the assets of domestic science and technology companies, regardless of their market capitalization, including common stocks, initial public offering stocks, and borrowed money, if any. KTCSX Advisors may also invest in foreign companies in the technology sector of developed and emerging market countries or other industries within the technology sector.
Sebastian P. Werner has been the Principal Manager of KTCSX since November 30, 2017. The fund invested 11.1% in NVIDIA, 8.2% in Meta Platform, and 7.4% in Microsoft as of July 31, 2023. It also invests in various other technology companies. .
As of November 30, 2023, KTCSX’s year-to-date, three-year, and five-year annualized returns are 50.1%, 7.1%, and 17.5%, respectively. KTCSX has an annual expense ratio of 0.73%.
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