Apple Stock (NASDAQ:AAPL)
The big tech sector has been the single most important contributor to the market’s rally this year. However, this phenomenon has been around for quite some time; for evidence, consider the performance of Apple stock over the past five years.
Why Should You Invest in Stock Funds for Apple Technology?
Apple Inc. has established itself as one of the most successful technology companies in the world, and its name is now known by virtually everyone. Apple is one of the largest and most profitable companies in the world, and its market capitalization is over $2 trillion, making it one of the most valuable companies in the world.
Purchasing shares of Apple through a fund that invests in the company’s stock is one way to reduce risk while simultaneously increasing exposure to the company’s stock. These funds make investments in a diversified portfolio of Apple stocks, giving you the opportunity to put your money into a variety of stocks rather than just one.
How to Make Sense of the Results of Apple Tech Stock Funds
It is essential to have a solid understanding of the performance of the fund before making a decision about which Apple tech stock fund to invest in. Metrics such as the fund’s returns, expense ratio, and diversification strategy can be utilized in order to make this determination.
The Fidelity® Select Technology Portfolio (FSPTX) is an excellent illustration of a high-performing Apple-centric technology stock fund. Over the past decade, this fund’s performance has been superior to that of the S&P 500 while maintaining an expense ratio of 0.71 percent. Putting money into a fund such as FSPTX can provide investors with the opportunity for increased returns, which is one reason why this investment choice is so appealing.
Even though many other stocks have lagged behind, a lot of attention has been paid to the fact that a relatively small number of mega-cap technology companies have been the primary force behind 2023’s rally. Apple (NASDAQ:AAPL) has increased by more than 33% since the beginning of the year, crushing the returns of both the S&P 500 SPX +0.18% and the tech-heavy Nasdaq Composite. As a result, Apple has become the second-best performing FAANG stock, behind only the parent company of Facebook, Meta Platforms (NASDAQ:META).
Before the crash in tech stocks that occurred in the bear market of 2022, the FAANG+M cohort—an abbreviated way to refer to the tech giants Meta, Apple, Amazon.com (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), Google parent Alphabet (NASDAQ:GOOGL), and Microsoft (NASDQ:MSFT)—had enjoyed a long run of massive gains. This is not a new story.
It’s possible that managers who have had relatively little interaction with such heavyweights in technology are cursing themselves right about now. In point of fact, the outsized influence of technology companies on the returns of active mutual funds over the past several years is especially obvious when looking at a single variable, specifically whether or not these funds have owned Apple stock.
Christopher Harvey, an analyst at Wells Fargo, pointed out a “recurring theme” in a note to clients that he sent out on Wednesday. The theme is that the absence of just Apple in a portfolio has been sufficient to fuel manager underperformance. This note is a continuation of his ongoing series investigating the returns of active managers.
According to Harvey’s data, Apple has made a particularly significant contribution so far this year: the total return of the S&P 500 would be 8% if it included Apple, but it would only be 6.2% if it did not include Apple. The influence of the company that made the iPhone is readily apparent going even further back.
According to Harvey, Apple has been responsible for more than one-tenth of the total return of the S&P 500 index since 2018. In the time period beginning on December 31, 2017, the total return for the S&P 500 index has been 69.3%, while that of Apple has been 329.1%. If Apple is excluded from the calculation, the return on the index during that time period is reduced to 59%.
Harvey makes use of these data to demonstrate that the technology industry as a whole has become too volatile for active portfolios.
According to Harvey writes, “a reluctance to embrace uber-caps remains too big a hurdle,” which will cause large-cap managers to lag behind the general market in 2023.
Apple has just reported a much better-than-expected quarter, which was bolstered by sales of the iPhone. This comes at a time when the rallies of some other large tech players seem to hang on relatively modest fundamentals. This is the most recent example in a long line of evidence that supports the continuation of the investment case for the stock.
Those in charge of managing money who have bet against it this year or in the past will continue to learn their lesson the hard way.
Those individuals who are interested in gaining exposure to the tech giant’s stock while simultaneously mitigating risk may find that investing in Apple tech stock funds is an excellent investment option. The key strategies to take into consideration are gaining an understanding of the fund’s performance and maximizing returns by remaining knowledgeable about the technology industry, maintaining a long-term investment strategy, and reinvesting dividends. You will be able to potentially maximize your returns and accomplish your investment goals if you follow these steps in order.
Featured Image: Pexels @ Tranmautritam
