Your Tech Exposure May Be More Than You Realize
The technology stock sector has performed so well for so long that few investors today would question whether to own tech. It’s only a question of how big your portfolio’s tech stake should be.
With technology stock mutual funds the best-performing domestic stock fund sector in the first half of 1999--up 34.4% on average--some investors might be tempted to chase after one of the 50 or so funds that specialize in tech shares.
But wait: It’s possible you already own plenty of tech stocks. That’s because in recent years many broadly diversified stock funds have been snatching up tech stocks with both hands.
In fact, nearly 200 growth stock funds hold at least 33% of their assets in the tech area, according to fund tracker Morningstar Inc. And about 27 growth funds have invested more than half their assets in tech stocks, Morningstar adds, including IDS Growth, Janus 20 and White Oak Growth.
Even passive index funds have a decent tech presence, as tech stocks have become such a huge market sector in the 1990s. Standard & Poor’s 500 index funds now invest about 20% of assets in major tech stocks, including such names as Intel and Microsoft.
The main advantage of using diversified mutual funds to invest in technology is that the funds’ broad portfolios temper the extreme volatility in individual tech stocks.
Before adding more technology to your portfolio, investment advisors suggest looking at the tech stakes of the diversified funds you already own.
Indeed, “you can become accidentally overweighted in technology pretty easily,” said Jack Bowers, who publishes the Fidelity Monitor newsletter in Rocklin, Calif.
And that’s assuming you count only the usual suspects as tech companies--firms that make or develop computers, semiconductors, software or networking devices, along with those hugely popular companies that service or run Internet sites.
In reality, many other firms in disparate industries could also fit under the tech banner because of their enthusiastic embrace of computerization.
For example, the Pasadena-based Guinness Flight Wired Index fund includes brokerage Charles Schwab, news service Reuters, oil field services giant Schlumberger and media titan News Corp. among its top “tech” holdings.
In any case, if more tech is what you want, here are four ways to buy in via mutual funds:
* Broad-based technology funds. These funds have leeway to invest in many tech subgroups. Some well-known funds include Alliance Technology ([800] 227-4618), Firsthand Technology Value ([888] 884-2675) and T. Rowe Price Science & Technology ([800] 638-5660).
* Sector-specific funds. Roughly a dozen funds focus on stocks in tech subgroups such as the Internet, software and computers. (Note: These can be extremely volatile funds.)
Choices range from the fairly new Internet ([888] 386-3999) and Monument Internet ([888] 420-9950) funds to Fidelity Select Computers and Fidelity Select Electronics ([800] 544-8888).
* Growth stock funds. Among broadly diversified portfolios, growth funds are most likely to have ample tech stakes. Such funds include IDS Growth ([800] 328-8300), Van Wagoner Emerging Growth ([800] 228-2121) and White Oak Growth ([888] 462-5386).
* Index funds. Popular Standard & Poor’s 500 index funds include those run by Vanguard Group ([800] 662-7447) and USAA ([800] 382-8722).
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Russ Wiles is a regular contributor to The Times and co-author of “How Mutual Funds Work,” published by Simon & Schuster. He can be reached at russ.wiles@pni.com.
