A mutual fund is a collection of stocks handpicked by industry experts and sold as a type of prepackaged bundle. We’ve rounded up some of the best technology mutual funds currently available on the market—along with some tips to help you find the next great tech sector mutual fund.
Quick look: the best tech mutual funds
- Vanguard Information Technology Index Fund (VITAX)
- Red Oak Technology Select Fund (ROGSX)
- BlackRock Technology Opportunities Fund (BGSIX)
- Fidelity Select IT Services Portfolio (FBSOX)
- T. Rowe Price Global Technology Fund (PRGTX)
- Putnam Global Technology Fund (PGTAX)
- Why buy a mutual fund?
- Characteristics of a great technology mutual fund
- Best Technology Mutual Funds to Buy
- 1. Vanguard Information Technology Index Fund (VITAX)
- 2. Red Oak Technology Select Fund (ROGSX)
- 3. BlackRock Technology Opportunities Fund (BGSIX)
- 4. Fidelity Select IT Services Portfolio (FBSOX)
- 5. T. Rowe Price Global Technology Fund (PRGTX)
- 6. Putnam Global Technology Fund (PGTAX)
- Final thoughts
Why buy a mutual fund?
Why do investors purchase mutual funds?
- Professional choices and management: Financial advisors are expensive. Investing in a mutual fund allows you to take advantage of expert portfolio management and stock choices without hiring a personal portfolio manager.
- Greater diversification: The best investors know that the key to protecting your savings against market movements is to diversify your portfolio by investing in a wide range of corporations, products, and asset classes. Despite the fact that most mutual funds operate within a single industry, fund managers know how to diversify within the industry to better protect your money.
- Liquidity: Mutual funds are very liquid, meaning that they can be bought and sold with ease. This means that on average, mutual fund owners have an easier time redeeming their shares when compared to those who have purchased a large number of individual stocks.
Characteristics of a great technology mutual fund
Before you go out and purchase a mutual fund, make sure you consider the following.
Because mutual funds are actively managed by investment professionals, they typically incur higher fees when compared to index funds of the same nature.
However, you should still be aware of the fees associated with buying into your mutual fund of choice, as even a slightly higher expense percentage can result in a massive loss of earnings. For example, let’s say you invest $10,000 in a fund with an annual expense ratio of 1.5%. Assuming that the fund returns an average of 10% in profits a year, after 20 years, you will have about $49,725.
However, if you invested that same $10,000 in an account with an expense ratio of 0.5%, you would have a little over $60,000 in your account after the same 20 years—a difference of over $10,000. It’s crucially important that you watch your expense ratios to ensure that you’re making the most of your investments.
The best mutual funds are actively managed by experienced investment managers and financial professionals. After all, mutual funds justify higher expense ratios by employing industry experts to evaluate stocks and choose the right times to buy and sell.
Before you invest in a mutual fund, be sure to check the credentials of the fund’s manager or team of managers—the best management teams have decades of experience with the company and in the fund’s industry. Be wary of mutual funds with high turnover rates or those which cannot keep professional managers on staff.
Most investors choose to invest in a mutual fund as a vehicle towards retirement. It’s important to consider a fund’s long-term performance before you invest. When researching mutual fund charts, try to look at trends over a period of 10 to 20 years instead of days or weeks.
The best funds are able to minimize loss during periods of negative market movement and maximize profits when the economy is thriving.
Best Technology Mutual Funds to Buy
1. Vanguard Information Technology Index Fund (VITAX)
Vanguard may be well-known as the inventor of the total market index fund, but the inventing powerhouse also offers a number of actively managed, industry-specific mutual funds as well.
Vanguard’s Information Technology Index Fund is a massive holding with over $23 billion in assets. The fund’s top holdings are all in companies and products you will recognize, including the Apple Corporation, Microsoft, and Facebook.
Other top holdings focus on the areas of semiconductors, software, and networking. Though the fund holds a large range of assets (including foreign tech stocks), the top ten holding make up about 55% of the fund’s portfolio.
The Vanguard Information Technology Index Fund tracks the MSCI IMI/Info Tech 25-50 GR Index, which is designed to represent a picture of the health of the information technology sector of the United States’ economy.
The Information Technology Index Fund has an expense ratio of 0.10%, which is exceptionally low, and you’ll pay no commission if you purchase your shares directly through Vanguard’s site.
However, it’s important to note that the fund does have a minimum initial investment of $100,000, which makes it a suitable choice for established investors only.
2. Red Oak Technology Select Fund (ROGSX)
Shares of the Red Oak Technology Select Fund are issued by Oak Associates, an investment management firm in operation for over 30 years. The Red Oak Technology Select Fund has been on the market since 1998 and has produced solid returns ever since.
Some of the major names you’ll see represented in the fund’s holdings include Intel and Alphabet, but the fund also includes a number of smaller and more volatile stocks like Red Hat, Inc, Total System Services, and VMWare to bring home larger movements.
The fund is unique because, regardless of the fact that investment managers have chosen to include only 36 stocks in the fund’s holdings, the Red Oak Technology Select Fund still does a great job of balancing out large and well-known cornerstones of the technology industry with innovative and more agile smaller stocks.
This mutual fund has an expense ratio of 0.97%, which is slightly lower than average for a fund of this type. However, due to a lack of diversification, the fund is riskier than others; it’s a better choice for younger investors and those with a higher tolerance for loss and sudden movements.
3. BlackRock Technology Opportunities Fund (BGSIX)
The BlackRock Technology Opportunities Fund has been curated with a mind towards long-term success, favoring stocks and operations favoring growth potential over years rather than short-term movements.
Like most other technology mutual funds, the fund’s largest holdings are in Microsoft, Apple, and Alphabet—but BlackRock also balances these big players out with investments in both emerging markets as well as newer companies like Alibaba, Salesforce.com, and Tesla.
The fund’s expense ratio is 1.49%, which is a little above average for a mutual fund of this type. However, if you’re interested in investing in an eclectic mix of stock that gives equal weight to up-and-coming tech companies as well as the industry’s standbys, the BlackRock Technology Opportunities Fund might be the right mutual fund for you.
4. Fidelity Select IT Services Portfolio (FBSOX)
The Fidelity Select IT Services Portfolio was one of the first tech-centered mutual funds, originating in February of 1998. As its name suggests, this mutual fund invests over 80% of its capital into companies providing IT services, maintenance tools and software.
The fund also invests a small amount of capital in biotech and pharmaceutical companies that complement the major players in the IT sector. Many are surprised to learn that the top holdings in the Fidelity Select IT Services Portfolio are in Visa and Mastercard; other big names include consulting firm Accenture PLC and tech powerhouse IBM.
The fund has over $2.67 billion in assets and its turnover rate is low, close to 27%. Ninety-five percent of the fund’s equities are based in the United States; the remainder is centralized in emerging markets.
The Fidelity Select IT Services Portfolio requires a minimum investment of only $2,500 and a low expense ratio of 0.77%. Experts rate the fund as lower-risk, an ideal choice for older investors who are looking to complement their retirement savings without dealing with the volatility of startups and companies in their infancy.
5. T. Rowe Price Global Technology Fund (PRGTX)
The T. Rowe Price Global Technology Fund is an aggressively managed fund—this means that the mutual fund managers frequently buy and sell assets to produce a larger return.
The fund invests in stocks that showcase high growth potential and ax them from the lineup when they fail to make significant returns. As you would expect from such an aggressive strategy, turnover is very high, clocking in at about 101%. However, this strategy has proven largely successful thus far, producing a three-year average return of around 22%. The fund has also consistently outperformed the MCSI All Country World Index IT, a measure of the global tech market.
The T. Rowe Price Global Technology Fund comes along with a required initial investment of $2,000, but this number lowers to $1,000 if you choose to open an IRA. The fund’s aggressive strategy is considered to be incredibly risky—younger investors have a lot to gain through this fund, but older investors may be putting themselves at unnecessary risk by investing.
6. Putnam Global Technology Fund (PGTAX)
The Putnam Global Technology Fund is a technology-centric fund focusing on international operations and the growing high-tech market in developing nations.
Some of its largest holdings are in Talend (a cloud development enterprise, Okta (a company producing and integrating a comprehensive single-identity sign-on system beneficial for travelers), and Activision Blizzard (an international video game development company).
Smaller holdings are in familiar names like Toshiba, Amazon.com, and Yandex. Though the fund’s risk rating is slightly higher than average, low expense ratios and consistently high performance may make the Putnam Global Technology Fund a suitable investment for a wide range of buyers.
It’s impossible to overstate the role that technology plays in our day-to-day lives—and in a world that’s becoming more interconnected by the hour, technology expansion and development has never been more rapid. Stay up-to-date on the latest developments in the tech sector by subscribing to Benzinga’s daily newsletters and technology newsfeed to learn about how technology is changing both our world and the economy.