Risk lovers, seeking healthy returns over a fairly long investment horizon may opt for technology mutual funds. It is believed that the technology sector is poised for a brighter earnings performance than the other sectors due to greater demand for technology and innovation. Improving industry fundamentals and emerging technologies such as AI, machine learning, robotics and data science are the key catalysts to the sector’s growth.
Meanwhile, most of the mutual funds investing in securities from these sectors take a growth-oriented approach that includes focusing on companies with strong fundamentals and a relatively higher investment prospect. Moreover, technology has come to have a broader meaning than just hardware and software companies. Social media and Internet companies are now part of the technology landscape.
The U.S. technology sector has performed remarkably well so far this year, despite fears related to a slowdown in the global economy as well as trade tensions. Tech has turned out to be the best performing sector so far in 2019, with the Technology Select Sector SPDR Fund (XLK) gaining 30.3% year to date.
Under such circumstances, investing in technology mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can be cumbersome. To that end, let us find out which of the two funds discussed below is better.
Janus Henderson Global Technology Fund Class D JNGTX
The fund seeks appreciation of capital in the long run. The fund invests the majority of in companies that are expected to benefit from technological advancement. JNGTX invests in equity securities of both American and foreign companies that have impressive growth prospects. The fund also invests about two-fifths of its assets in securities of companies that are economically tied to different countries across the globe, excluding the United States.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 22.8% over the 3-year and 18.8% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.
The Janus Henderson Global Technology Fund, as of the last filing, allocates its assets in top two major groups; Large Growth and Emerging Market. Further, as of the last filing, Microsoft Corp, Amazon.com Inc and Adobe Systems Inc were the top holdings for JNGTX.
Sporting a Zacks Mutual Fund Rank #1 (Strong Buy), JNGTX was incepted in December 1998 and is managed by Janus Fund. JNGTX carries an expense ratio of 0.83% and requires a minimal initial investment of $2,500.
T. Rowe Price Communications & Technology Fund Investor Class PRMTX
The fund invests heavily in securities of communications and technology companies. PRMTX may invest in securities of U.S. as well as non-U.S. companies. These companies can be involved in a variety of Internet-related industries such as e-commerce and digital products, and services firms, media, including publishing, advertising, broadcasting, and cable and satellite TV companies among others.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the 3 and 5-year benchmarks are 15.8% and 14.3%, respectively. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.
The T. Rowe Price Communications & Technology Fund, as of the last filing, allocates its assets in the top two major groups; Large Growth and Intermediate Bond. Further, as of the last filing, Amazon.com Inc, Facebook Inc. and American Tower Corp were the top holdings for PRMTX.
This Zacks Rank #1 fund was incepted in July 1997 and is managed by T. Rowe Price. PRMTX carries an expense ratio of 0.78% and requires a minimal initial investment of $2,500.
While both JNGTX and PRMTX carry a Zacks Mutual Fund Rank #1, upon having a closer look, we find that the former is a clear winner. Although both the funds have the same level of minimum investment, the administrative and other operating expenses of PRMTX are higher than JNGTX’s.
Also, PRMTX has returned 6.1% year to date compared with 28.9% returned by JNGTX in the same period. Meanwhile, PRMTX offers lower risk compared to JNGTX. JNGTX has a 3-year beta of 1.09 compared with PRMTX’s 1.00. However, JNGTX is worth the risk, given its lower costs and consistency in providing high returns on investment.
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