IT MUTUAL FUNDS
The IT and Technology sector is a kind of equity mutual funds that invest in entities involved in technological businesses such as developing softwares or manufacturing hardwares. This category also includes technological services and electronics entities such as those providing IT etc. The primary advantage of investing in these funds is that investors can benefit from the exposure to dozens of tech stocks from just one fund.
In this article, we will get to know about the tech sector and IT mutual funds to gain a better understanding of the same. Let’s get started.
INDIA AND IT SECTOR
Since the pandemic, the IT and tech sector of our nation is undergoing a rapid revolution and is formulating a new India by changing the business standards. The global sourcing market continues to grow at an increased pace. India remained the global top sourcing destination for several years. Some of the leading firms like TCS, Infosys, Tech Mahindra, Wipro among others have created an immense goodwill in this sector.
Investors should invest in these funds ideally for the purpose of diversification. They can help you create good wealth in the long term if you do the proper research before opting for the fund. You can get in touch with our ZFunds expert to assist you in your financial freedom journey.
MERITS OF IT FUNDS
IT funds as any thematic fund is focused particularly on one sector. There does not exist so much diversification. All sectors go through market volatilities and cycles and perform accordingly, and when a particular sector is booming, funds that focus on growth sectors give maximum returns and grow beyond the margin from the benchmark and other funds. The IT sector has given consistent returns over a long period now.
2. High returns:
IT funds have the main aim to outperform equity funds by staying invested in Tech sector as it is one of the booming industries in India, All sectoral funds have the prime aim to outdo diversified funds if fund corpus is invested in a specific sector which is expected to grow in recent years. If this agenda fails, the fund may suffer a heavy dent but may beat the market returns of other funds if that sector boosts up. Hence, there exists a high risk reward ratio.
3. Investment pan market cap:
It is focused on one specific sector but not one capitalization. It invests predominantly in tech based shares but entities of all sizes varying from small and mid cap to large cap. It depends on different AMCs and schemes if they would invest a major chunk of the corpus in any one market cap or go forward with diversifying throughout.
THINGS TO CONSIDER
1. Past Performance:
Measuring the performance of the fund in both bearish and bullish phases is a mandate as it helps investors in selecting reliable funds. IT funds have grown in recent times and hence are very popular among investors. India as a strong IT base and developing economy has seen some high returns from investments in this field. Nevertheless, it must be vouched if a fund can continue to perform in upcoming market cycles.
2. Involved Costs:
There are different costs involved in funds such as entry and exit load , expense ratio etc. Investors must review these costs before going forward with investments.
3. Financial Goals:
Setting up a goal before investing is the foremost and most important decision to make. It is very significant to evaluate that the fund objective is aligned to the financial goals. If investors can analyse the IT sector and are up for taking risk then they may invest in these funds as it is a high risk - high return fund.
4. Other basics:
There are other different influencing factors such as the Assets Under Management, Net Asset Value among others which are to be viewed to take comfort over reliability and investor engagement in the fund.
TOP 5 IT MUTUAL FUNDS TO INVEST IN
|FUND NAME||FUND CATEGORY||5 YEAR RETURNS|
|ICICI Pru Technology Fund||IT - Equity||34.69%|
|Tata Digital India Fund||IT - Equity||35.36%|
|Aditya Birla Sun Life Digital India Fund||IT - Equity||33.69%|
|SBI Tech Opportunities Fund||IT - Equity||29.31%|
|Franklin India Tech Fund||IT - Equity||27.25%|
WHO SHOULD INVEST
Below are few pointers which will help investors to decide whether they should opt for IT funds:
- If they are ready to stay invested for a long tenure, they can go forward with tech funds as this sector needs adequate time to grow. Investment for short terms is not advised in IT funds.
- It is apt and ideal for investors who have good knowledge of the markets and macro situations of the economy. If they have patience and an eye for tracking the growth of various thematic funds then they can go for it.
- Investors having high risk tolerance can go ahead with this fund. All sector funds went through thick and thin and due to the mandate, a fund will have to remain invested in IT based entities even when the sector is performing bearish. The IT sector has higher volatility which will generate a high risk high reward factor.