Risk lovers, seeking healthy returns over a fairly long investment horizon may opt for technology mutual funds. It is believed that technology is poised for a brighter earnings performance than the other sectors due to greater demand. 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 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 after social distancing to curb the spread of COVID-19 led to a spike in the shares of tech stocks. The Technology Select Sector SPDR Fund (XLK) has gained 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 and Innovation Fund Class T (JAGTX)
This fund invests a huge portion of its assets in equity securities of those companies that are expected to gain from improvements or advancements in technology. JAGTX seeks capital appreciation for the long run and invests in both domestic and foreign companies with stable growth potential. It generally invests in companies from different nations including the United States.
This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 21.8% over the 3-year and 19.5% 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 and Innovation Fund Class T, as of the last filing, allocates its assets in the top two major groups; Large Growth and Emerging Market. Further, as of the last filing, Microsoft Corp., Apple Inc. and Adobe Systems Inc. were the top holdings for JAGTX.
Sporting a Zacks Mutual Fund Rank #1 (Strong Buy), JAGTX was incepted in December 1998 and is managed by Janus Fund. The fund carries an expense ratio of 0.76% and requires a minimal initial investment of $2,500.
DWS Science and Technology Fund - Class A (KTCAX)
This fund aims for capital growth that can be achieved by investing in technology companies. Therefore, the fund invests the majority of its assets in common stocks of companies that operate in the technology sector. KTCAX mostly aims to invest in companies that develop and implement scientific and technological innovation, which offer high levels of growth.
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 19.3% and 13.9%, respectively. To see how this fund performed compared in its category, and other #1 and 2 Ranked Mutual Funds, please click here.
The DWS Science and Technology Fund, as of the last filing, allocates its assets in Large Growth stocks. Further, as of the last filing, Microsoft Inc., Apple Inc. and Amazon.com Inc. were the top holdings for KTCAX.
This Zacks Rank #1 fund was incepted in July 1948 and carries an expense ratio of 0.93%. It requires a minimal initial investment of $1,000.
While both JAGTX and KTCAX carry a Zacks Mutual Fund Rank #1, upon having a closer look, we find that the latter is a clear winner. The administrative and other operating expenses of JAGTX are higher than KTCAX’s.
Also, JAGTX has returned 1.3% year to date compared with 2.5% returned by KTCAX in the same period. Meanwhile, both the funds bear the same risk. Both KTCAX and JAGTX have a 3-year beta of 1.02. Under such circumstances, KTCAX is worth buying, given its lower costs and consistency in providing high returns on investment.
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