Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

AT the start of 2021, it looked very much as if the decades-long bull market in the technology sector was drawing to a close. The recovery favoured more economically-sensitive sectors, such as mining, financials or leisure. However, technology has proved far more resilient over the year than many expected, with companies in the sector going from strength to strength.

Many investors on Fidelity’s platform believe it can repeat the trick in 2022. There are two global technology funds among the top-selling ISA and SIPP funds and many of the other funds – Baillie Gifford American, Fidelity Index US, Fidelity Index World – have significant weightings in technology stocks.

There is little doubt that technology offers some of the best long-term growth opportunities. However, it is worth acknowledging that a choppier period may be looming for the sector. High valuations have been supported by low interest rates: technology companies generate a lot of cash and this earnings stream is more valuable when interest rates are low. As interest rates rise, it may put pressure on share prices. Central banks have been laying the groundwork. Even if the Omicron variant defers action, some movement on interest rates is still expected in 2022.

At the same time, many of the largest technology companies are also facing regulatory pressure. A slew of online content rules in Europe threaten to disrupt the business model for some of the technology giants. Technology companies are already being forced to defend themselves against accusations that they have failed to prevent online harms.

Against this backdrop, it appears investors may be tentatively starting to look elsewhere. It is noteworthy that there is a UK stockmarket tracker fund among the ISA best-sellers this month. It used to be that investors would gravitate to their home market, but after a long run of weak performance, the UK has been widely unloved even by domestic investors. This has left valuations looking very cheap, to the extent that private equity buyers are emerging to snap up UK assets – supermarket Morrisons, for example, outsourcer G4S or infrastructure builder John Laing. It is only one month and only one fund, but at the margins it may suggest that investors are warming up to the UK once more.

Equity income remains a notable absentee from both the SIPP and ISA lists. It used to be a popular choice for equity investors – particularly those looking to build up a tax-free income stream in an ISA – but a run of poor performance, particularly relative to the giant technology companies (which don’t tend to pay an income) has driven investors away. In a climate where the income available from bonds is low, equity income funds may prove a more popular choice in the year ahead.

Sentiment is still firmly in favour of technology and the US markets and this has been the right choice once again in 2021. However, a tougher period for the technology sector could be looming and investors are starting to explore new options. The best-sellers may prove a more eclectic list in the months ahead.  

Top 10 best-selling ISA funds on Fidelity Personal Investing in November 2021

1.    Rathbone Global Opportunities Fund
2.    Fidelity Index World Fund
3.    Fundsmith Equity Fund
4.    Baillie Gifford Positive Change Fund
5.    Legal & General Global Technology Index Trust
6.    Fidelity Index UK Fund
7.    Fidelity Global Technology Fund
8.    Baillie Gifford American Fund
9.    Fidelity Global Special Situations Fund
10.  Fidelity Index US Fund

Source: Fidelity International. Gross ISA sales in November 2021 for Personal Investors only.

Top 10 best-selling SIPP funds on Fidelity Personal Investing in November 2021

1.    Baillie Gifford American Fund
2.    Fundsmith Equity Fund
3.    Rathbone Global Opportunities Fund
4.    Fidelity Cash Fund
5.    Fidelity Global Technology Fund
6.    Fidelity Index World Fund
7.    Baillie Gifford Positive Change Fund
8.    Legal & General Global Technology Index Trust
9.    Vanguard LifeStrategy 80% Equity Fund
10.  Baillie Gifford Long Term Global Growth Fund

Source: Fidelity International. Gross SIPP sales in November 2021 for Personal Investors only.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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