For Some, Tech-Fund Rally Recalls Bubble Era

The rally began in March when many tech firms were able to meet or beat Wall Street’s muted expectations for the first quarter. In many cases, the achievement was due as much, or more, to cost cutting as to slightly improved customer demand. Many investment professionals are debating whether recent momentum has driven mercurial tech shares too high.

“The rally is far in excess of where it should be,” says Robert Gensler, manager of the $54.2 million T Rowe Price Global Technology Fund (PRGTX). “Fund managers don’t want to underperform or be left behind, so you see something of a seller’s strike.”

For investors tempted to leap on the tech bandwagon for fear of missing a rally, such comments should provide pause. Of course, for those who have held tech-heavy funds through more than three years of depressed values, the latest gains provide some reprieve. But the question of whether to take the plunge is difficult.

Before making a tech bet, investors first should consider how much technology exposure they have through other stock funds. During the bear market, some investors unwittingly made an outsize bet on the sector by adding technology funds to already tech-heavy growth funds in their portfolios. Tech stocks make up about 16% of the value of the Standard & Poor’s 500-stock index, but they make up 24% of the average large-cap growth fund, for example.