Should You Invest in a Technology Mutual Fund to Grow Your IRA?

Make technology mutual funds an excellent alternative to bet on an actively growing market and boost your IRA

If you picture your golden years as a time to pursue your passions, volunteer, relax, and take care of your grandchildren, you are not alone. Some retirement hopes are truly universal! And yet, today, also due to inflation, immaturity of the 401(k) system, and the Covid-19-related crisis, nearly 70% of Americans feel concerned about their financial future. 

Luckily, IRAs offer you a practical and tax-efficient way to grow your retirement funds – especially when investing wisely and consistently. Here's the role that investing in technology mutual funds can play in helping you achieve your retirement goals. 

What Are Technology Mutual Funds? Let's Start From the Basics

Technology mutual funds are an alternative to more common retail funds such as exchange-traded funds (ETFs). Unlike standard mutual funds and ETFs, technology mutual funds allow users to specifically invest in technology companies and securities. 

Depending on your mutual fund's portfolio, you will have the opportunity to tap into a wide range of tech equities and stocks, from industry giants like Amazon.com Inc. (AMZN) to fast-growing tech startups. 

For most retail investors, the goal of investing in tech mutual funds is to bet on high-growth-potential innovations and emerging technologies, while minimizing risk by diversifying their portfolio and leveraging the help of expert managers.

How a Technology Mutual Fund Can Help You Grow Your IRA

Independent Retirement Accounts (IRAs) can be an efficient way to build up your retirement funds in a tax-efficient way. And, thanks to the power of compound interest, you'll be able to reap greater benefits than just holding money in a savings account. 

But, when looking to grow their IRA, most investors opt for simple, low-maintenance, and low-risk index-based funds, such as ETFs and the Vanguard 500 Index Fund. 

Undoubtedly, these are a great option for most investors. But if you are looking for a fund that might outperform the market and significantly grow your savings, technology mutual funds can help. 

Can Represent a High-Growth Investment

In 2021, technology and IT funds have consistently ranked among the top-performing funds and offered an average return of 67%. Over the past years, they have also outperformed the benchmark set by the Morningstar US Technology Index.

These stats, alongside the growing interest in emerging technologies and innovation, make technology mutual funds an excellent alternative to bet on an actively growing market and boost your IRA.

Are Low-Maintenance and Professionally-Managed

Unlike ETFs, mutual funds – including technology funds – are not traded freely through the stock market. Therefore, you will need to partner with professional money managers, who will use their expertise to allocate your assets.

The aim is to increase capital gains while minimizing risks, and you can even specify what are your investments' objectives. This makes mutual funds a low-maintenance solution that does not require you to manually move each of your assets. Don't forget that, in any case, IRAs are long-term investments, and making early withdrawals might defeat the point of your efforts!

Can Offer You Access to a Broad Range of Technology Securities

The world of technology is developing at lightning speed, and it can be hard to pinpoint the right IT stock to invest in. Adding your assets to a mutual fund can help you distribute your assets across a wide range of companies and securities, from reliable players like Alphabet Inc. (GOOG) to high-growth-potential small and emerging companies.

Other Types of IRA: Which Might Be Best For You?

In 2022, the global tech industry is worth an estimated 5.3 trillion U.S. dollars, and North America owns a whopping 35% market share of the international IT sector. Given the speed at which this industry is growing and developing, it is no wonder that it has attracted the interest of millions of investors. 

Nonetheless, if you have a low-risk tolerance or are not ready to cope with industry-specific fluctuations, technology mutual funds might not be the right investment to grow your IRA. Depending on your risk tolerance and personal financial goals, some alternatives include cryptocurrency IRAs, standard mutual funds, ETFs, and safe blue-chip index funds. 

Unfortunately, when looking for the perfect way to grow your IRA, there is no single solution that will work equally well for all investors. 

That is why you should consider using an online IRA calculator that can help you understand what contributions to make, what solutions are best to grow your funds, and what type of retirement account (Traditional, Roth, Simple, SEP, or Spousal) will work for your unique situation.