Q. I invested in T. Rowe Price Science & Technology Fund a few years ago and have seen my holdings shrink to less than one-third of my original investment. Is this fund fatally flawed, or will it revive with the technology sector?
A.J., via the Internet
A. Other investors feel your pain. This was the amazing, colossal $12 billion tech fund at a time when that sector headed south.
One major mistake was that it bought Internet networking stocks when it felt they’d become cheap, then watched them plummet further. Though it has significantly declined in size to $4.4 billion in assets, the fund remains somewhat unwieldy in size, and its performance hasn’t improved.
T. Rowe Price Science & Technology Fund (PRSCX) declined 42 percent over the past 12 months and had a three-year annualized decline of 18 percent. Both of these results rank in the lowest one-third of all technology funds.
“I’d be very careful about technology funds in general, since I think investors need to sit down and see how much tech exposure they have in their existing holdings,” warned Christopher Traulsen, senior analyst with research firm Morningstar Inc.
Despite its strong overall research efforts, T. Rowe hasn’t seen its tech funds match the competition in recent years. However, Traulsen believes “there isn’t cause to throw in the towel just yet” on T. Rowe Price Science and Technology.
Michael Sola, who’d worked on the fund’s management team for some time, became the fund’s lead manager at the beginning of this year. Traulsen takes a “moderately positive” view of that event, though it’s too early to tell how much the move will help the fund’s performance.
Three-fourths of the fund is in technology, and its other significant groups are health care and services. The holdings are primarily large-cap stocks, including Cisco Systems, Vodafone, Nokia class “A” and Microsoft.
T. Rowe Price Science & Technology is a “no-load” (no sales charge) fund that requires a $2,500 minimum initial investment.
Q. My 23-year-old son received shares of stock from his uncle 15 years ago. My son now wants to sell the stock to pay off his college debt. Would he be responsible for paying capital gains taxes?
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C.C., via the Internet
A. Yes, your son must pay capital gains tax on the sale of those shares.
“Because the shares were given to him, your son’s starting basis is the same as the starting basis for the uncle who gave him the stock,” said Maggie Doedtman, manager of tax training for H&R Block in Kansas City, Mo.
The basis is what was paid for the shares, plus any purchase cost such as commissions. If the market value of the stock on the date the gift was given was lower than the original basis, your son’s basis is the lower figure.
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Andrew Leckey answers questions Sunday in Business and Tuesday in Your Money. Address inquiries to Andrew Leckey, P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at [email protected].