The tech sector took a beating during parts of last year, highlighted by Facebook's (FB) 19% stock price drop in a single day, and it’s $120 billion loss over the course of a single week. Just days prior, Netflix (NFLX) reported weaker quarterly results and a grim outlook for subscribers.
These stories have exacerbated investor concerns about a continuing sector-wide slowdown in the technology space, especially after 2017’s 30% rally, which has provoked lingering fears of an impending drop-off. But instead of divesting from tech stocks completely, investors may limit their downside risk by cultivating a well-diversified exposure to tech plays, via technology mutual funds. Here are four of the best performers:
- Tech stocks saw their fair share of struggles in 2018, as with the example of Facebook's 19% stock price plummet 19% in a single day.
- Many investors are worried that the 30% rally in tech names, that occurred in 2017, will inevitably be chased by a sector-wide drop-off.
- Those interested in the tech sector, but worried about volatility, can combat risk with the diversification offered by tech mutual funds such as Fidelity Select IT Services Portfolio (FBSOX), Red Oak Technology Select Fund (ROGSX), T. Rowe Price Global Technology Fund (PRGTX), and Columbia Seligman Global Technology Fund (SHGTX).
(All figures are current as of August 8, 2019)
Fidelity Select IT Services Portfolio (FBSOX)
- Issuer: Fidelity
- Assets under management: $4.02 billion
- Expense ratio: 0.74%
- YTD performance: 37.60%
FBSOX is one of the largest and oldest of the technology mutual funds. Over the life of the fund (inception date February 1998), it has delivered average annualized returns exceeding 12%. The fund's objective is capital appreciation, and it invests at least 80% of its assets in companies providing IT services. The mutual fund is relatively concentrated, although there are 50 equities in the fund's portfolio, the top 10 holdings account for 64% of the assets. About 95% of the equities are domestic, with the remainder in international emerging markets.
The turnover rate is low at just 27%. FBSOX requires a $2,500 minimum investment and $25 minimum recurring investments. The fund has delivered one-, three-, and five-year annualized returns at 31.74%, 17.46%, and 19.07%, respectively.
Red Oak Technology Select Fund (ROGSX)
- Issuer: Oak Associates Funds
- Assets under management: $648.81 million
- Expense ratio: 0.94%
- YTD performance: 25.21%
ROGSX is a long-term growth fund that bases stock picks on fundamentals without regard to market cap. There are just 34 holdings in the fund's portfolio, with the top 10 equities accounting for just 46% of its assets. You'll see household names like Alphabet (GOOG) and Intel (INTC ), as well as somewhat lesser-known equities like VMware, Inc. (VMW) powering the fund's solid returns.
Since its inception in 1998, the fund has delivered returns of nearly 5%, with one-, three-, and five-year annualized returns at 26.84%, 27.92%, and 20.30%, respectively.
T. Rowe Price Global Technology Fund (PRGTX)
- Issuer: T. Rowe Price
- Assets under management: $4.95 billion
- Expense ratio: 0.91%
- YTD performance: 27.21%
This is an aggressive growth fund for investors seeking long-term capital growth. Turnover is brisk at 101%, as you'd expect from an aggressively managed fund. Since its inception in 2000, the fund has consistently outperformed the MCSI All Country World Index IT and the Lipper average for global technology funds.
One-, three-, and five-year average annual returns are 6.98%, 22.16%, and 21.84%, respectively. There is a $2,000 minimum investment required ($1,000 for an IRA) and a charge of $100 to add to an account.
All stock mutual funds contain a degree of risk, therefore more conservative investors may wish to consider fixed income funds.
Columbia Seligman Global Technology Fund (SHGTX)
- Issuer: Columbia Threadneedle Investments
- Assets under management: $1.17 billion
- Expense ratio: 1.32%
- YTD performance: 34.73%
SHGTX is another aggressive growth fund and compared with the MCSI World Index IT Index Net, its portfolio is heavily concentrated in semiconductors (48.5% vs. 15%) and short on IT (6% vs. 17%). However, SHGTX has consistently outperformed the index by between 5% and 10% over the past three years.
One-, three-, and five-year annualized returns are 11.71%, 23.31%, and 20.20%, respectively. The fund requires a $2,000 minimum investment.