How to Choose the Right Technology Sector Specific Mutual Funds?
As the advancements in technology are continuing at a fast pace, the growth of Artificial Intelligence is increasing in every sector of life. So, we can say that the advances in Artificial Intelligence are fueling the technology sector. What has not changed? We have evolved from driver-oriented cars to self-oriented cars, generated voice-powered personal assistants, and now even robotic advisory is in trend. By the year 2020, the revenue from AI is expected to reach $46billion and grow by 50% every year.
The technology sector involves those businesses that deal with the manufacturing of electronics. It works in the creation of software, computers or products, and services related to information technology. This sector has been offering a wide range of services to its customers to ease their work labor and enjoy leisure. Because of the high growth potential, this sector is often the most attractive field for investment.
How to Pick the Right Sector Funds?
This sector includes a diverse range of businesses such as e-commerce, social media, cloud-based computing, etc. Sectors funds are alternatively known as specialty funds and they help in narrowing down the concentration of the portfolio by investing in sector-specific market. There are various factors that one must ponder upon before investing in technology sector-specific funds in order to select the right funds. Discussed below are a few of them:
- Sector Performance
Market is always on a cyclical shift as a result of which certain sectors may perform better at sometimes and some at other times. For instance, the technology sector may see a rise when the new technology is hitting the market and sometimes it may hit low when other sectors are in trend. So, before investing into the technology sector, one must consider the historical performance of the sector and then decide the fund for investment. This makes it easier for the investors to determine the effect of investment in a specific sector on the entire portfolio.
- Growth Potential
Since investment in specific sector funds involves too much risk, so one must consider analyzing the sector’s past performance record. It is very important for an investor to weigh the potential of a sector fund to earn appreciable profits in the future. While investing in technology fund, one must have an eye for the bigger picture, i.e., all the constraints and factors affecting the growth of this sector in mind.
Sector funds, most of the times, are not designed to follow the strategy of buy and hold the investments. The most important part of investment is how easily you can get your cash in hand. Before investing in any sector-specific fund, you must make sure that the fund offers liquidity and has no long lock-in period.
Now as we know that the sector funds have investment in specified stocks, so diversification among the stocks is necessary in order to minimize the volatility and risk of loss. Technology funds invest not only in IT companies but in those companies as well which are related to IT, hence providing diversification in the best possible way.
Investment in the Technology sector has the capability to beat the market, but it comes with specific downside risks. Though these funds are moderately risky, they are the choice of a few aggressive investors. It is imperative on the part of the investors to do proper prior research about the fund’s historical performances and investment style before vesting their hard-earned money. One must seek the advice of his or her financial advisor to make the right pick. The experts at MySIPonline can assist you to make the best decisions considering this aspect. You can easily connect with us via phone call or email.
- This Independence Day, Let's Pledge for Freedom from Financial Worries2246 min read Aug 14, 2018
- Are Balanced Funds Better Than Balanced Advantage Funds?2984 min read Aug 02, 2018
- 7 Points to Ponder While Investing in Small Cap Funds8303 min read Jul 19, 2018