4 Mutual Funds Banking Big On Technology Trends
Zacks Investment Research | Sep 23, 2019 09:33PM ET
The U.S. technology sector has been one of the fastest-growing sectors so far this year, beating the other S&P 500 sectors, owing to a string of factors pushing it forward. From introduction of groundbreaking new technologies to their large-scale implementation, the technology sector is benefiting tremendously. Therefore it would be ideal to invest in a couple of mutual funds that are set to gain from these factors.
Tech Outpaces Other Sectors YTD
The Technology Select Sector SPDR Fund (XLK) rose a staggering 29.9% on a year-to-date basis. Needless to say, the sector has been witnessing a constant implementation of new technologies and trends, which are pushing it higher.
Key Trends in the Tech Sector
First, the arrival of 5G wireless networks looks promising. While the construction of 5G infrastructure is underway, it is imperative to note that these are 10-40 times faster than the current 4G LTE wireless networks.
Therefore, companies that are currently in the process of offering radio-frequency chips required for 5G networks and phones are well positioned to ride the 5G tide. According to Bank of America Merrill Lynch (NYSE:BAC), 5G phone shipments could rise from 17 million this year to 130 million next year and 327 million in 2021.
Second, implementation of new technologies in military projects is a major driver for the sector. In fact, a large part of military spending goes into the deployment of new technologies. These are meant to increase precision, improve navigation systems and sensor technologies along with lowering casualties for U.S. military and civilians.
Finally, increased implementation of AI and machine learning to automate industrial production all are pushing the technology sector.
Our Choices
We have, therefore, selected four mutual funds that invest in technology companies that are well-poised to gain from the aforementioned trends. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Zacks Investment Research
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