Should You Add Technology Mutual Funds To Your Portfolio?

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oi-Shubham Kumar
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Published: Monday, March 21, 2022, 15:14 [IST]

Technology mutual funds offer a viable alternative to more traditional retail products like exchange-traded funds (ETFs). Unlike traditional mutual funds and ETFs, technology mutual funds allow investors to invest solely in technology firms and assets. Technology funds have been popular in terms of investment prospects in recent years. This is due to the IT sector’s continual expansion in GDP share and rising exports of IT goods and services.

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Why should you invest?

The world of technology moves at a breakneck pace, making it difficult to pick the correct IT stock to buy. Every industry has been transformed by technology. Many trading enterprises have benefited from the fast development of digital technology paired with the smartphone boom, which has, in turn, pushed many young people to trade online.

India’s IT industry is booming, thanks to a slew of positive factors. Cloud services, Artificial Intelligence (AI), Fintech, E-commerce, Virtual Reality (VR), Metaverse, and Blockchain technology are all developing technologies that Indian IT companies may benefit from.

In the calendar years 2020 and 2021, technology mutual funds had exceptional results, with average returns of 59.4 percent and 67.3 percent, respectively. In 2021, they have consistently been among the best-performing funds.

These numbers, together with the growing interest in innovative technologies and innovation, make technology mutual funds an excellent option to participate in a fast-growing industry while also increasing your retirement savings.

It is critical to invest in a technology sector fund at the right time. Exiting the fund becomes critical as well. This is because industries follow the business cycle. The fund is affected by the cycle’s ups and downs. Investing in high-growth areas can result in potentially substantial profits. Also, a downturn in the sector, on the other hand, might result in considerable losses.

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What are the options for you?

In India, the technology industry has been one of the most important drivers of economic growth. Notably, India’s IT sector is one of the world’s most popular outsourcing locations. Since the outbreak of the pandemic, many activities such as shopping, employment, education, and leisure have switched to digital mode, giving the industry a boost. In general, there are two ways to get involved in the tech revolution. The first route is through domestic sector funds and the second through ETFs/international funds of funds. The benefit of investing in international funds of funds/ETFs is that investors get exposure to stocks.

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Bottom Line

Today’s buzzword is technology, which is becoming more prevalent in every industry and element of life. Some of the world’s technological businesses are among the world’s largest enterprises, as well as among the best-performing stocks. The majority of Indian technology businesses have functioned based on delivering software and backend services to western enterprises. They have, however, lacked the necessary innovation to drive them into the top tier of global technological firms.

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Story first published: Monday, March 21, 2022, 15:14 [IST]

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