The latest inflation figures have raised hopes for a 25-basis point rate cut by the Federal Reserve in its Sept 17-18 meeting. The U.S Bureau of Labor Statistics reported that the Producer Price Index (PPI) for August rose 0.2%, with the core PPI excluding food and energy items increasing 0.3%. Separately, the U.S. Department of Labor stated that initial jobless claims for the week ending Sept. 7 were reported at 230,000, surpassing expectations of 225,000, suggesting the U.S. economy is likely heading for a soft landing.
Technology mutual funds could see gains in this scenario as lower interest rates can decrease borrowing expenses for tech firms and increase investment in emerging fields like artificial intelligence, cloud computing and semiconductor industries. Reduced rates also boost the valuation of profits for tech companies, making these funds appealing due to reduced expenses and positioning them for continued performance and innovation.
From an investment standpoint, we have selected three tech mutual funds, which are expected to hedge one’s portfolio against any economic downturn and provide attractive returns. Mutual funds, in general, reduce transaction costs and diversify the portfolio without commission charges associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These mutual funds, by the way, 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.
Fidelity Select Semiconductors Portfolio FSELX seeks capital appreciation. FSELX invests most of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components.
Adam Benjamin has been the lead manager of FSELX since March 16, 2020. Most of the fund’s holdings were in companies like NVIDIA Corp. (25%), NXP Semiconductors N.V. (6.9%) and ON Semiconductor Corp (6.7%) as of May 31, 2023.
FSELX’s 3-year and 5-year returns are 28.3% and 35.3%, respectively. The annual expense ratio is 0.67% compared with the category average of 1.24%. FSELX has a Zacks Mutual Fund Rank #1.
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 invests most of its assets and borrowings, if any, in common stocks of science and technology companies. KTCAX advisors also invest in foreign securities.
Sebastian P. Werner has been the lead manager of KTCAX since Dec. 1, 2017. Most of the fund’s holdings were in companies like Microsoft Corp. (9.5%), NVIDIA Corp. (9.2%) and Meta Platforms, Inc. (8.8%) as of April 30, 2023.
KTCAX’s 3-year and 5-year returns are 9.2% and 19.7%, respectively. The annual expense ratio is 0.87% compared with the category average of 1.02%. KTCAX has a Zacks Mutual Fund Rank #1.
Red Oak Technology Select ROGSX invests most of its assets in equity securities of companies of companies within the technology sector. ROGSX advisors also invest in common stocks of U.S. companies and may also invest in equity REITs, foreign stocks and American Depositary Receipts.
Robert D. Stimpson has been the lead manager of ROGSX since Jan. 17, 2019. Most of the fund’s holdings were in companies like Alphabet Inc. (8.2%), Amazon.com, Inc. (7.5%) and KLA Corp (6.8%) as of April 30, 2024.
ROGSX’s 3-year and 5-year annualized returns are 9.4% and 15.6%, respectively. Its net expense ratio is 0.91% compared to the category average of 1.24%. ROGSX has a Zacks Mutual Fund Rank #2.
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