3 Technology Mutual Funds to Invest in for Long Term

The technology sector has taken a beating this year, mostly due to a relentless increase in interest rates by the Federal Reserve to quell sky-high inflation. Higher interest rates impact tech companies’ future cash inflows. So, they will have less money for innovation, which doesn’t bode well for their growth prospects. Needless to say, tech stocks have felt this pressure throughout the year, as the tech-focused Nasdaq Composite Index has declined 24% year to date.

However, such is the faith of investors in the futuristic value of tech stocks and the importance of technology going forward that even in these volatile times, whenever the major indexes have closed a session or a week in the green, it’s the tech stocks that have gained the most.

To put things into perspective, since the beginning of the pandemic, the tech sector has largely thrived as institutions became even more tech-dependent and doubled down on their digital transformation efforts, emphasizing cloud infrastructure improvements, data and analytics capabilities, cybersecurity, and business model evolution. Companies began to reskill their workforces to optimize remote work capabilities and take full advantage of advanced technologies such as Artificial Intelligence.

Even at the retail customer level, work from home, expanding digital payments, increased video streaming, and skyrocketing video game sales have become the “new normal” trends, thus helping the tech sector. It can be reasonably prudent to infer that the sector is poised to perform well going forward, as it is resilient.

Hence, astute investors may look to invest in technology mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money)

We have thus selected three such technology mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio.

Columbia Seligman Technology and Information Fund CCIZX usually invests the majority of its net assets in securities of technology and information companies, applying a global industry classification standard. CCIZX also invests in foreign securities and is non-diversified.

Jeetil Patel has been the lead manager of CCIZX since Jul 12, 2015. Three major holdings for the fund are 6.1% in LAM Research Corp., 5.5% in Apple Inc. and 4.2% in Synaptics Inc.

CCIZX’s 3-year and 5-year annualized returns are 20.4% and 18.2%, respectively. Its net expense ratio is 0.92% compared to the category average of 1.05%. CCIZX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

DWS Science and Technology Fund KTCAX usually invests the majority of its net assets in common stocks of science and technology companies of any size. KTCAX focuses on one or more industries in the technology sector. KTCAX also invests in foreign securities and is non-diversified.

Daniel J. Fletcher has been the lead manager of KTCAX since Nov 30, 2017. Three major holdings for the fund are 10% in Microsoft Corp., 8% in Apple Inc. and 7.3% in Alphabet Inc. Class A.

KTCAX’s 3-year and 5-year annualized returns are 11.2% and 14.3%, respectively. Its net expense ratio is 0.88% compared to the category average of 1.05%. KTCAX has a Zacks Mutual Fund Rank #1.

Fidelity Advisor Technology Fund Class A FADTX seeks capital appreciation by investing the majority of its net assets in common stocks of companies principally engaged in processes, or services that will provide or benefit significantly from technological advances and improvements. FADTX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, to select investments.

Adam Benjamin has been the lead manager of FADTX since Jul 19, 2020. Three major holdings for the fund are 24.6% in Apple Inc, 19.2% in Microsoft Corp. and 6% in NVIDIA Corp.

FADTX’s 3-year and 5-year annualized returns are 17.5% and 17.4%, respectively. Its net expense ratio is 0.96% compared to the category average of 1.05%. FADTX has a Zacks Mutual Fund Rank #1.

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