3 Tech Mutual Funds to Thrive Amid Strong Labor Conditions - January 3, 2025

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Given the strong U.S. labor market and the Federal Reserve’s cautious interest rate approach, tech mutual funds present attractive investment prospects.

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U.S. Labor Market Resilience

The U.S. labor market continues to show resilience, with unemployment claims falling to an eight-month low. The Labor Department reported on Thursday that jobless claims totaled 211,000 for the week ending Dec. 28, decreasing by 9,000 from the previous week’s revised level of 220,000. The four-week moving average was 223,250, a decrease of 3,500 from the previous week’s revised average of 226,750. This indicates a healthy economy with low layoffs.

Continuing claims were 1,844,000, a decrease of 52,000 from the previous week’s revised level of 1,896,000. The 4-week moving average was 1,870,750, a decrease of 6,750 from the previous week’s revised average of 1,877,500.

Federal Reserve Takes a Cautious Approach

In response, the Fed has reduced interest rates to 4.25-4.50%, signaling a shift in monetary policy. However, the Fed has downgraded the rate hike expectations for 2025 to only two times from the initial projection of four times. This shift is a clear indication that the Fed is optimistic about economic growth.

Tech Mutual Funds a Strong Investment Choice

As a result, the current environment makes tech mutual funds an attractive option for investments. The steady economic conditions foster the sustained development of the technology sector, which is favorable due to technological advancements, reasonable interest rates, and strong global demand.

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We have chosen three Tech mutual funds — Fidelity Select Semiconductors Portfolio (FSELX – Free Report) , DWS Science and Technology Fund (KTCAX – Free Report) and T. Rowe Price Science and Technology Fund (PRSCX – Free Report) — that investors should buy now for the long term. These funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), positive three-year and five-year annualized returns, minimum initial investments within $5000 and expense ratios considerably lower than the category average. So, these funds have provided a comparatively stronger performance and carry a lower fee.

Fidelity Select Semiconductors Portfolio fund invests in companies engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX uses fundamental analysis like financial condition, industry position and market conditions to select investments.

Adam Benjamin has been the lead manager of FSELX since March 16, 2020. Most of the fund’s holdings were in companies like NVIDIA Corp. (24.8%), Taiwan Semiconductor Manufacturing Co Ltd (7.7%) and ON Semiconductor Corp (7.2%) as of Aug. 30, 2024.

FSELX’s 3-year and 5-year returns are 19.2% and 32.6%, respectively. The annual expense ratio is 0.63% compared with the category average of 1.25%. FSELX has a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category and other 1 and 2 Ranked Mutual Funds, please click here.

DWS Science and Technology Fund invests most of its net assets in common stocks of science and technology companies. KTCAX concentrates its assets in the group of industries constituting the technology sector and may focus on one or more industries in the technology sector.

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Sebastian P. Werner has been the lead manager of KTCAX since Dec. 1, 2017. Most of the fund’s holdings were in companies like Apple Inc. (10.6%), Microsoft Corp. (8.7%) and NVIDIA Corp. (8.5%) as of July 31, 2024.

KTCAX’s 3-year and 5-year returns are 11.6% and 20.7%, respectively. The annual expense ratio is 0.87% compared with the category average of 1.03%. KTCAX has a Zacks Mutual Fund Rank #1.

T. Rowe Price Science and Technology Fund seeks long-term capital growth by investing in common stocks of companies expected by T. Rowe Price to benefit from the development, advancement, and use of science and technology. PRSCX advisors invest in foreign stocks, futures and options.

Anthony Wang has been the lead manager of PRSCX since Oct. 1, 2023. Most of the fund’s holdings were in companies like Apple Inc. (14.3%), NVIDIA Corp. (11.4%) and Microsoft Corp. (10.7%) as of June 30, 2024.

PRSCX’s 3-year and 5-year returns are 10.1% and 17.3%, respectively. The annual expense ratio is 0.79% compared with the category average of 1.05%. PRSCX has a Zacks Mutual Fund Rank #1.