3 Technology Mutual Funds That Beat the S&P 500 Over the Long Term

Technology - 3 Technology Mutual Funds That Beat the S&P 500 Over the Long Term

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Technology stocks have proven themselves as a source of high returns since the 1980s. Long-time tech heavyweights Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL) have helped to drive this boom since that time. However, other mega-cap companies such as Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), and Facebook, Inc. (NASDAQ:FB) did not exist in the 1980s. In fact, Mark Zuckerburg founded Facebook in 2004. Still, all five of these firms rank among the 10 largest market caps in existence today.

Even with heightened volatility and severe losses during industry downturns, tech stocks have proven themselves as some of the best performers in the S&P 500. Moreover, many technology mutual funds have existed since that time.

Some outperform the S&P’s long-term average return of around 10%. The following three mutual funds have outperformed the S&P since their inception.

Technology Mutual Funds: Columbia Seligman Communications and Information Fund Class A (SLMCX)

Technology Mutual Funds: Columbia Seligman Communications and Information Fund Class A (SLMCX)Expenses: 1.27%, or $127 per $10,000 invested annually.
Minimum Investment:
$2,000

Columbia Seligman Communications and Information Fund Class A (MUTF:SLMCX) has existed since 1983. It boasts a long, steady track record as one manager, Paul Wick, has been with the fund since 1990.

Its 10-year average performance comes in at just under 15%. However, its one-year and five-year performances have been strongest, registering at 23% and 22% respectively. Returns have averaged over 13.9% over its 35-year history.

More than 90% of the fund’s investments consist of stocks in U.S.-based technology companies that analysts rate as large growth companies. However, it places just over 5.5% of its funds in China-based Broadcom, its 3rd largest holding. Its most significant positions consist of Lam Research Corporation (NASDAQ:LRCX), which makes up 8.1% of the fund. Micron Technology, Inc. (NASDAQ:MU) stands as a close second with 7.7%.

And given the recent turmoil, investors might be relieved to know that the fund’s managers avoided Amazon and Netflix, Inc. (NASDAQ:NFLX). Despite not having these holdings, the fund currently carries an above average risk, though it typically has kept risks low in the past.

Investors can get into the fund with as little as $2,000 and will pay expenses of 1.27%.

Technology Mutual Funds:  Fidelity Select IT Services Portfolio (FBSOX)

Technology Mutual Funds:  Fidelity Select IT Services Portfolio (FBSOX)

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Expenses: 0.79%
Minimum Investment: $2,500

The Fidelity Select IT Services Portfolio (MUTF:FBSOX) recently celebrated the 20-year anniversary of its inception. In that time, FBSOX has produced outsized returns.

Its 10-year track record stands at almost 17% per year on average. The last 12 months have been especially successful for the fund, as FBSOX earned over a return of over 34% in that time. Over the life of the fund, returns have averaged almost 13% per year over the last 20 years.

FBSOX focuses on U.S.-based information technology services companies. However, the fund bets heavily on the increasingly cashless society and IT consulting. Its two most substantial holdings, Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA), account for a combined 31.1% of the portfolio.

Cognizant Technology Solutions Corp (NASDAQ:CTSH), a New Jersey-based technology consulting firm makes up 8.4% of the fund’s holdings. The fund also counts Paypal Holdings Inc (NASDAQ:PYPL), Accenture Plc (NYSE:ACN), and IBM Common Stock (NYSE:IBM) within its top-10 holdings. Hence, electronic payments and IT consulting remain the fund’s core interests.

Moreover, the terms of the fund are budget-friendly for investors. Buyers need only $2,500 to open a position in the fund. The fund’s fees stand at 0.79%, and analysts rate the fund as “low risk.”

Technology Mutual Funds:  Fidelity Select Software & IT Services Portfolio (FSCSX)

Technology Mutual Funds:  Fidelity Select Software & IT Services Portfolio (FSCSX)

Expenses: 0.76%
Minimum Investment: $2,500

Fidelity describes its Fidelity Select Software & IT Services Portfolio (MUTF:FSCSX) fund as one that invests in products and processes for software or IT-based services. Since its inception in 1985, FSCSX has focused on mega-cap, U.S. technology companies. In many cases, the fund sticks with the most recognized names in the technology industry.

Since that time, it has earned an average 16% return per year over its nearly 33 years of existence. Its 10-year return averages 16.75%, and it returned over 29.7% over the last 12 months.

Over 45% of the fund consists of the two class of Alphabet stock, Microsoft and Facebook. Despite the fund’s large positions in these three companies, the fund carries only an average risk. The fund also counts Adobe Systems Incorporated (NASDAQ:ADBE), Salesforce.com, Inc. (NYSE:CRM), and Visa among its major holdings. The fund tends to avoid stocks with high price-to-earnings (P/E) ratios. However, CRM will remain an exception until the increased profits that analysts project come to fruition.

Moreover, FSCSX stands as an affordable fund for the average investor. They can get in with as little as $2,500 and will pay only 0.76% in expenses.

As of this writing, Will Healy is long MU stock.


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