Tech is taking over our lives, and our 401(k)

As technology takes over more of people’s daily lives, it’s also taking over ever-bigger chunks of their retirement accounts. Surging prices for technology stocks around the world mean the industry is making up a larger proportion of global markets. In the United States, Apple, Google’s parent company and other tech companies account for nearly 24 percent of the Standard & Poor’s 500 index. A decade ago, they made up less than 17 percent of S&P 500 index funds. The makeover is even more dramatic overseas, where ascendant companies like China’s Tencent and Alibaba have quickly stormed into the ranks of the world’s largest. As a result, investing in many stock funds has increasingly become a bet on technology companies. That could be reassuring for investors given how tech companies have been able to deliver big profit growth for years, even when global economic growth was only middling. But it’s also a concern for skeptics who see tech stocks as overly pricey and primed for a pullback. The worries came into starker relief in recent weeks, after tech stocks tumbled more than the rest of the market. To see how the tech takeover is changing investing, consider mutual funds and exchange-traded funds that focus on stocks from emerging markets. These kinds of funds offer access to growth in China and other developing economies. A decade ago, these funds were dominated by hulking telecoms, energy companies and the commodity producers that feasted on fast growth in construction and factory activity. The shift toward technology stocks and away from old-economy companies is a result of the rise of emerging markets’ middle classes, which are increasingly going online and also benefiting from the world’s voracious demand for technology, said Patricia Ribeiro, senior portfolio manager at the American Century Emerging Markets fund and the American Century Emerging Markets Small Cap fund. “It’s a sign of the times,” she said. “In the emerging space, it’s a story about the consumer.” Ribeiro has 33 percent of her Emerging Markets fund invested in technology stocks, more than any other sector. Some of her recent acquisitions include Momo, a Chinese dating app, and AAC Technologies, a Chinese supplier for Apple. A decade ago, the portion devoted to tech was just 12 percent. The fund has ranked in the top 8 percent of its category for returns over the last five years, according to Morningstar. In the United States, tech stocks in the S&P 500 doubled the gain of the index through the year’s first 11 months. A slump in the sector in recent weeks reminded investors that tech stocks are historically prone to price swings and expensive of late, based on several measures of value. Still, technology companies are in the midst of reshaping several industries, from retail to media, and proponents see even more growth ahead. Ken Allen, portfolio manager at the T. Rowe Price Science & Technology fund, calls it “being on the right side of change.” Plus, the pace of adoption is accelerating. It took Microsoft’s Windows nearly 26 years to get to 1 billion users. For Google’s Android operating system, it took less than six years. A big difference between tech companies of today and the last time the industry was such a dominant force in the market during the late 1990s is how much profit they’re making. Tech companies are not only making money, they’re delivering some of the strongest gains as customers continue to snap up iPhones and click on ads in Facebook. Tech stocks in the S&P 500 reported 21 percent growth in earnings per share last quarter, triple the rate of the overall index.