Technology Mutual Funds Spread Your Risk
Kane, Leslie, Medical Economics
If you prefer having professionals make the choices for you, stick with mutual funds.
Don't be scared off by most funds' grim recent returns. Portfolios are just starting to limp back from the tech wreck.
Only about 52 of the 378 technology funds tracked by Morningstar have been in existence for five years. That's an important watermark, since you want to gauge a fund's performance prior to the meteoric sector rise of 1998 to early 2000.
Besides looking at returns, stick with a fund from a large company. "These firms have scores of analysts researching technology stocks, which should provide portfolio managers with a competitive edge," says Christine Benz, an analyst with Morningstar. Smaller companies may not be able to cover the field adequately.
These five funds have the track record, quality of research and analysis, and management experience to strengthen your portfolio.
*Alliance Technology Fund. A conservative technology portfolio is not an oxymoron. This low-- turnover fund spreads its bets across many tech subsectors, including semiconductors, software, and computer services. Its managers avoid speculative stocks, and stick with established names like First Data, AOL Time Warner, and Microsoft. Fund managers look for rapidly growing firms that dominate their niche, and they usually hold on long term.
First Data has been a top performer recently, returning about 38 percent year-to-date, despite the sector dive.
The funds volatility is among the lowest in the tech sector. Turnover's way below average, too, making the fund highly tax-efficient. And its managers are high on experience, each having chalked up more than nine years with the portfolio.
*Dresdner RCM Global Technology Fund. "With so many technology funds launched in the last five years, it was amateur hour in the tech-fund sector," Benz says. "We learned that it pays to go for a team of pros like the ones who run this fund." Portfolio managers Huachen Chen and Walter C. Price have been running technology portfolios for 10 years, and have been in charge of the Dresdner RCM Global Technology Fund since 1999.
The fund is a prime choice not only for its top returns, but because it cuts across many technology sectors and company sizes, and avoids initial public offerings. "The managers are supported by a crack inhouse research team as well as grassroots researchers hired on a per-project basis:' Benz says. One of their smartest choices was Siebel Systems, in San Mateo, CA, a company that makes sales- and marketing-- information software systems. Although many corporations have cut software budgets, demand for customer-relationship software has remained high, and sales have doubled in each of the last four years. …