There are plenty of choices in the Sector - Tech category, but where should you start your research? Well, one fund that might be worth investigating is DWS Science and Technology A (KTCAX). KTCAX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
We note that KTCAX is a Sector - Tech option, and this area is loaded with many options. Found in a wide number of industries such as semiconductors, software, internet, and networking, tech companies are everywhere. Thus, Sector - Tech mutual funds that invest in technology let investors own a stake in a notoriously volatile sector, but with a much more diversifies approach.
History of Fund/Manager
KTCAX finds itself in the DWS family, based out of New York, NY. Since DWS Science and Technology A made its debut in September of 1948, KTCAX has garnered more than $1.18 billion in assets. The fund's current manager, Sebastian Werner, has been in charge of the fund since December of 2017.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 20.04%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.11%, which places it in the top third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, KTCAX's standard deviation comes in at 23.01%, compared to the category average of 16.74%. The fund's standard deviation over the past 5 years is 22.2% compared to the category average of 17.62%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. KTCAX has a 5-year beta of 1.19, which means it is likely to be more volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a negative alpha of -0.66, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.
This fund is currently holding about 88.71% in stocks, with an average market capitalization of $650.19 billion. With turnover at about 27%, this fund makes fewer trades than the average comparable fund.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, KTCAX is a load fund. It has an expense ratio of 0.88% compared to the category average of 1.03%. So, KTCAX is actually cheaper than its peers from a cost perspective.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, DWS Science and Technology A ( KTCAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
Your research on the Sector - Tech segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
