Cloud computing has been one of the hottest and fastest-growing segments of the tech sector, both before and during the pandemic. In fact, the pandemic opened up the cloud space for those businesses and industries that were hesitating to go through this digital transformation. Cloud computing enables users to access data from anywhere and at any time with the help of Internet. Here is where 5G technology comes into play. 5G’s low latency, higher capacity, and increased bandwidth are making the cloud space operate smoothly.
The combination of 5G with cloud computing will help firms to lower IT costs by removing the need for servers and related maintenance costs, while providing faster and high-quality services. In fact, 5G will reduce the response time and make it easier to carry out remote tasks. Especially, in the new normal era where majority of the employees are working from home, cloud computing has become a necessity and also offers flexibility in costs, scalability, and efficiency for companies that cannot turn their heads away from digitization. According to a Gartner (NYSE:IT) forecast, global end user spending on public cloud services is expected to grow to $332 billion in 2021, at an annual rate of 23.1%.
Beyond corporate usage, 5G and cloud have seen wide acceptance in daily life, especially in entertainment. Cloud gaming hosted in remote servers is streamed globally and thanks to 5G’s higher speed and lower latency, gamers and viewer can have better experience. With further 5G deployment gamers will be able to immerse themselves in augmented and virtual reality experience.
Additionally, even at homes and in personal life, cloud and 5G have become an integral part. Smartphone makers have started launching 5G-enabled phones and with the growing usage of Internet of Things (IoT), these phones can connect to other household devices easily. From smart home devices to self-driven cars, personal care gadgets 5G and cloud computing are making life easier and comfortable.
4 Top Picks
With 5G deployment, the cloud space is sure to boom. Therefore, we have selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) and invest in companies that have exposure in cloud computing and 5G. These funds have returned more than 30% to investors on a year-to-date basis. In addition, the minimum initial investment is within $5,000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is 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 Technology Portfolio FSPTX aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSPTX has returned 31.3% and 32.7% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSPTX is a non-diversified fund and has an annual expense ratio of 0.69%, which is below the category average of 1.05%. Some of the fund’s top cloud computing or 5G stock holdings are Microsoft (NASDAQ:MSFT), Qualcomm (NASDAQ:QCOM), Cloudflare (NYSE:NET) and Salesforce (NYSE:CRM).
T. Rowe Price Communications & Technology Fund Investor Class PRMTX aims for long-term capital growth. This non-diversified fund invests the majority of its assets in securities of communications and technology companies.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, PRMTX has returned 28.2% and 25.5% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRMTX has an annual expense ratio of 0.75%, which is below the category average of 0.88%. Some of the fund’s top cloud computing or 5G stock holdings are T Mobile US (NASDAQ:TMUS), Verizon Communications (NYSE:VZ), Slack Technologies (NYSE:WORK) and Nvidia (NASDAQ:NVDA).
Franklin DynaTech Fund Advisor Class FDYZX aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that the fund manager believes are leaders in innovation, and takes advantage of new technologies.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FDYZX has returned 29.4% and 28.4% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FDYZX has an annual expense ratio of 0.60%, which is below the category average of 1.00%. Some of the fund’s top cloud computing or 5G stock holdings are Microsoft, Amazon (NASDAQ:AMZN), DocuSign (NASDAQ:DOCU) and ServiceNow (NYSE:NOW).
T. Rowe Price Global Technology Fund PRGTX aims for long-term capital growth. The fund invests most assets in the common stocks of companies that its managers expect will generate majority of revenues from the development, advancement and use of technology.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, PRGTX has returned 30.4% and 29.6% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRGTX is a non-diversified fund and has an annual expense ratio of 0.86%, which is below the category average of 1.05%. Some of the fund’s top cloud computing or 5G stock holdings are ServiceNow, Alibaba (NYSE:BABA), Workday (NASDAQ:WDAY) and Salesforce.
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