Home Adviser Fund Update Is Technology’s Season Over? Published March 30, 2012 Is the Tech Rally Over? As one of the mildest winters in recent memory drew to a close, the annual ‘season’ of Tech Winter also ended. In years past, we’ve written to you about what we call Tech Winter–the four-month period from November to February during which technology stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. have traditionally outperformed. We’ve tracked this phenomenon over the past two-plus decades and found overwhelming evidence of the trend. While it is not a sure thing every year, the most recent Tech Winter lends some support to the theory. From November 2011 through February 2012, the lack of snow we saw this winter was echoed in the lagging performance of a number of Fidelity and Vanguard’s diversified tech-heavy funds when compared to S&P 500. As is typical, however, most of the technology sector funds at the two firms outperformed the market. Vanguard’s 500 Index (used in the charts as proxy for the S&P 500) returned 9.8% from the start of November 2011 through February of this year, with four of Vanguard’s tech-heavy funds surpassing it. The notable outperformers were MidCap Growth (26% of assets in tech stocks through February), which gained a solid 11.6% over the period, and Information Technology ETFA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., which gained 12.0%. Growth Index (up 10.6%, 32% in tech) and Morgan Growth (up 9%, 37% in tech) also outperformed, while Explorer (25% in tech) had a near miss, gaining 9.7%. PRIMECAP (32% in tech), Capital Opportunity (35%) and PRIMECAP Core (27%) all underperformed by about 300 basis points (3%) or more. Fidelity’s tech-focused Select funds were also Tech Winter outperformers, although Select Technology lagged the index by about 50 basis points. The best of the bunch, Select Computers, gained 14.9%, while Select Technology (13.6%) and Select Computers (12.2%) had respectable showings as well. A big part of why we like to talk about the Tech Winter phenomenon is because it highlights the value that skilled active management can bring to a portfolio. One of the key underpinnings to our philosophy at Adviser Investment is that you should buy the manager, not the fund™. By building our client portfolios to include some of the industry’s top managers from Fidelity, Vanguard and other fund providers, we’re hitching a ride on the shoulders of giants. The managers we invest alongside know how to take advantage of short-term market phenomena (like Tech Winter), while also maintaining a disciplined long-term strategy. When looking at these shorter-term trends, we do not advise making drastic moves in a portfolio in an attempt to catch four months of potential outperformance–such an approach runs counter to our long-term investment philosophy. However a diversified portfolio with tech exposure could help investors benefit from Tech Winter without adding unnecessary riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline.. Tech for All Seasons Beyond the technology stocks’ traditional seasonal outperformance, a commitment to the sector makes sense to our best managers on an extended basis, as the long-term growth trajectory, while likely to be volatile, shows promise; tech is a key component of the growth holdings in our client portfolios. Tech’s influence is also felt within the health care sector (another sector where we see continuing growth potential), as there is overlap in the fields of biotechnology and medical data, services and equipment. This approach has enhanced our client portfolios not only during the four months of Tech Winter, but the rest of the year–year in and year out–as well. For ideas on how to best include technology stocks as a part of your investment strategy, we recommend you talk to a trusted investment adviser. About Adviser Investments Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016. For more information, please visit www.adviserinvestments.com or call 800-492-6868. Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. 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