4 Funds To Buy On H1 Tech Rally

The U.S. technology sector has performed remarkably well so far this year, despite issues such as slowdown in global economic growth and the U.S.-China trade war. Although the sector suffered a few drawbacks, it continues to shine thanks to the recent developments between the United States and China at the G-20 summit in Japan. Let us take a look at some solid technology mutual funds that could benefit from this.

Technology Outperformed Other Sectors in H1 of 2019

The technology sector outperformed the S&P 500’s 10 other sectors in the first half of 2019, with the Technology Select Sector SPDR Fund (XLK) gaining 25.9% (as of Jun 27, 2019). Almost half of this gain is attributed to June’s rally.

While the prospects of easier monetary policy from the Fed certainly boosted the sector, it was investor optimism around a favorable outcome of the Trump-Xi talks on Jun 29 that fueled the rally.

Reversal on Huawei Ban, U.S.-China Tariff Pause

The much-awaited meeting between President Donald Trump and his Chinese counterpart Xi Jinping did meet investor expectations last week. Both leaders agreed to put aside the prospect of further retaliatory trade tariffs on each other’s goods so trade talks can be picked up from where they were a month back.

Secondly, Trump allowed U.S. firms to sell equipment, which doesn’t impact United States’ national security, to China’s Huawei. The ban reversal on Huawei is a definite boost for U.S. technology firms since 36% of Huawei’s chief suppliers are home based. These include major American semiconductor companies such as Micron (NASDAQ:MU), Qualcomm (NASDAQ:QCOM), Broadcom (NASDAQ:AVGO) and Intel (NASDAQ:INTC).

In fact, VanEck Vectors Semiconductor ETF (SMH), which is one of the most notable ETFs for semiconductor stocks, surged to 26.2% on a year-to-date basis. Chip stocks took a 15.5% dip in May when the United States blacklisted Huawei, but have effectively bounced back after the recent turn of events.

Therefore, U.S. companies that have revenue exposure to Huawei and other Chinese firms are likely to gain. American semiconductor companies, in particular, are on the forefront of these gains.

Our Choices

Considering the aforementioned factors, investing in technology mutual funds that invest the majority of their assets in the American technology sector could boost your portfolio.

We have selected four such mutual funds for you. All 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 less than $5000.

We expect these funds to outperform their peers in the future.

Now we come to the most vital question: 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: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Semiconductors Portfolio FSELX fund aims for capital growth. The fund invests most of its assets in securities of companies principally engaged in the design, manufacture or sale of semiconductors and semiconductor equipment.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSELX carries a Zacks Mutual Fund Rank #1. The fundhas an annual expense ratio of 0.73%, which is below the category average of 1.29%. It has year-to-date returns of 12.3%.The fund has no minimum initial investment.

T. Rowe Price Science and Technology Fund PRSCX aims for long-term capital appreciation. The fund invests the majority of its assets in common stocks of companies that are expected to profit from the development and use of science and technology.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRSCX carries a Zacks Mutual Fund Rank #1. The fundhas an annual expense ratio of 0.79%, which is below the category average of 1.29%. It has year-to-date returns of 14.6%.The fund has a minimum initial investment of $2500.

Red Oak Technology Select Fund ROGSX seeks capital growth over the long-term. The fund invests a chunk of its assets in equity securities of companies operating in the technology sector. The fund mostly invests in common stocks of American companies although it may also invest in equity REITs, foreign company stocks and American Depositary Receipts.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

ROGSX carries a Zacks Mutual Fund Rank #2. The fundhas an annual expense ratio of 0.94%, which is below the category average of 1.29%. It has year-to-date returns of 13.3%.The fund has a minimum initial investment of $2000.

T. Rowe Price Global Technology Fund PRGTX aims for long-term capital appreciation. The fund invests the majority of its assets in common stocks of companies that mostly generate their revenues from development, advancement and use of technology.

This Zacks sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRGTX carries a Zacks Mutual Fund Rank #2. The fundhas an annual expense ratio of 0.91%, which is below the category average of 1.29%. It has year-to-date returns of 15.7%.The fund has a minimum initial investment of $2500.

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