Amidst the rough and tumble of this year’s stock market machinations, it’s rapidly turning into the fall of technology, or should I say the autumn of technology. Today, for example, the Standard & Poor’s 500 finished just about unchanged as companies in the energy, health care and materials sectors lost ground. The tech sector, however, was the strongest performer, rising 0.9%, thanks to big gains at megacaps like Cisco Systems (Symbol: CSCO), Apple (AAPL) and Microsoft (MSFT). At the same time, tech isn’t nearly as big a portion of the market as it used to be, making up about 16% of the S&P 500 at the end of last month, and many general equity funds have even less exposure.
If a quick check of your portfolio finds severe underexposure, you could just run out and buy the top-performing tech funds of the year. But historically that’s a ticket to next year’s worst performers. Instead, look for steady performance, low fees relative to similar funds and a long-term track record that’s among the best. A couple of funds come to mind in the tech sector.
The Allianz RCM Technology Fund (Symbol: RAGTX), which has been run by Walter Price and Huachen Chen for the past 12 years, is Morningstar’s pick and it’s a good one. Morningstar says the fund’s 14% average annual return over the past 10 years is better than 93% of other tech funds. The fund prospers by performing deep research on tech trends. Nintendo (NTDOY), for example, is a top holding and a top performer thanks to the Wii (we got one in our house recently).
Another choice, which was award a best-fund designation in the science and technology category by Lipper in March, is the Columbia Technology Fund (CTCAX) managed by Wayne Collette. It’s only been around since 2002 but it’s in the 98th percentile for tech funds over the past three years according to Morningstar. Collette likes to venture beyond the most common names and also play trends among more specialized firms. The fund’s top holdings at the end of July included several cell phone tower companies, tech outsourcer Cognizant (CTSH) and MEMC Electronic Materials (WFR), which makes silicon wafers for computer chips and solar power cells.
For those more partial to index funds, there is the usual array of exchange-traded funds in this sector, as well. The Technology SPDR (XLK) owns all the tech companies in the S&P 500 and has an expense ratio of just 0.24%. Vanguard’s similar Information Technology ETF (VGT) has expenses of 0.25%. For a more worldly play, the iShares Global Technology Fund (IXN) invests in companies all over and has expenses of 0.48%.