3 Solid Mutual Funds to Ride on the Ongoing Tech Rally
Wall Street resumed its rally in May after a brief pause in April, powered by tech stocks. Rising inflation and fears of higher interest rates for a longer period have been the major concerns lately, but the optimism surrounding artificial intelligence (AI) appears to have overshadowed such fears.
On May 24, the Nasdaq finished at 16,920.79 points, its 12th all-time high of 2024. This proves the index’s solid run this year. In fact, Nasdaq has been on a rally since 2023 and had a solid first quarter. The Nasdaq has gained 12.7% year to date and 43.4% in 2023.
The primary reason behind the rally has been the ongoing optimism surrounding AI, especially generative AI, which is being led by NVIDIA Corporation NVDA, the largest manufacturer of generative AI chipsets.
NVIDIA’s solid first-quarter earnings have heightened investor expectations regarding AI and its potential. The chipmaker has been solely responsible for boosting the AI infrastructure industry.
NVDA reported first-quarter revenues of $26 billion, up 18% from the prior quarter and 262% year over year. The company’s shares have jumped 173.4% in the past year and 115% year to date.
Many experts believe that AI is still in its early stages, with its full potential yet to be fully realized.
As a result, other tech companies are increasingly focusing on AI. Furthermore, the proliferation of smart devices is expanding the AI landscape, as these devices require computing and learning capabilities for tasks like face detection, image recognition and video analytics.
The tech rally is expected to be fueled further as more companies join the AI race.
3 Best Choices
As a result, we've chosen three funds from the tech sector that are worth buying. These funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Advisor Semiconductors Fund Class I FELIX fund seeks capital appreciation. FELIX invests primarily in common stocks. Fidelity Advisor Semiconductors Fund Class I normally invests at least 80% of its assets in securities of companies principally engaged in the design, manufacture, or sale of electronic components; equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.
Fidelity Advisor Semiconductors Fund Class I fund has a track of positive total returns for over 10 years. Specifically, FELIX’s returns over the three and five-year benchmarks are 26.4% and 31%, respectively. FELIX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%.
To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.
Janus Henderson Global Technology and Innovation Fund JNGTX aims for long-term growth of capital and specializes in technology. JNGTX invests the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.
Janus Henderson Global Technology and Innovation Fund has a track of positive total returns for over 10 years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 6.1% and 17.1%, respectively. JNGTX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.80%.
To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.
Fidelity Select Technology Portfolio FSPTX fund seeks capital appreciation by investing most of its assets in common stocks of companies principally engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements. Most of the fund's holdings were in companies like Microsoft Corp (17.3%), Apple (17%) and Nvidia Corp (13.4%) as of Aug 31, 2023.
Specifically, Fidelity Select Technology Portfolio fund’s returns over the three and five-year benchmarks are 7.9% and 20.6%, respectively. The annual expense ratio of 0.68% is lower than the category average of 1.23%. FSPTX carries 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.
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