Technology-Based Mutual Funds Drop 18%: Investors Cautioned to Take a Staggered Approach
With technology-based mutual funds experiencing an 18% decline this year, market experts suggest that long-term investors should capitalize on this correction with a staggered investment approach through SIPs and STPs, ensuring they cap their exposure to around 10-15% of their overall portfolio.
Lead: In 2023, technology-based mutual funds have seen significant market fluctuations, with losses reaching up to 18%. Market analysts, including Sagar Shinde—Vice President of Research at Fisdom—recommend this moment as an opportune entry point for long-term investors. They advocate a staggered investment strategy to mitigate risks rather than committing to lump-sum investments. With global uncertainties affecting market dynamics, investors are encouraged to understand the balance between potential gains and systemic risks.
The Current State of Technology-Based Mutual Funds
– Technology funds have lost as much as 18.45% in the current calendar year.
– The average return for these funds is around -14.99%.
– The Motilal Oswal Digital India Fund has recorded the sharpest decline, with an 18.45% drop.
– Other notable performers include:
– SBI Technology Opportunity Fund: -12.41%
– Aditya Birla SL Digital India Fund: -15.15%
– ICICI Prudential Technology Fund: -12.29%
Market Forecasts and Broader Economic Factors
Sagar Shinde warns that the underperformance of tech funds can be attributed to various economic factors, including weak earnings, cautious consumer spending, and a potential slowdown in the U.S. economy.
– Key influencers include:
– U.S. inflationary trends and trade tensions affecting multiple sectors like logistics and manufacturing.
– Delayed IT deal closures due to cautious budget prioritization in businesses.
“Technology funds have faced declines in 2023 due to subdued earnings and an economic landscape shaped by global uncertainties,” Shinde noted, emphasizing the need for a measured approach to investment.
Managing Investment Expectations
As the market braces for potential turbulence, Shinde recommends that investors temper their expectations:
– Cap exposure in technology funds to around 10-15% of the total investment portfolio.
– Recognizing that many diversified equity funds already include substantial technology stock investments, a separate allocation may be redundant.
“I urge investors to moderate their expectations. With the current market conditions, our outlook for the sector remains cautious, albeit with reasonable valuations that could attract patient investors,” Shinde continued.
Long-term Outlook: Patience Pays Off
Despite the short-term setbacks, experts maintain a bullish long-term outlook for technology funds:
– Continued global emphasis on digital transformation, cloud computing, AI, and data analytics remains a driving force for tech spending.
– Indian IT firms are well-positioned to benefit from these shifts, though margins might remain pressured due to competitive wage inflation.
Kotak Institutional Equities anticipates an overall sequential revenue decline across large IT companies as a result of seasonal factors and diminished demand. Meanwhile, Motilal Oswal suggests that while growth is likely subdued, it has already been priced into current market valuations.
Guidelines for Potential Investors
Given the current circumstances, potential investors in technology-based mutual funds should consider the following:
– Understand the **risk appetite** based on individual financial situations.
– Assess investment horizons: long-term vs. short-term.
– Stay informed about sector-specific developments and market conditions.
Final Thoughts: Is Now the Right Time to Invest?
The recent downturn in technology-based mutual funds could indeed serve as a reasonable entry point for long-term investors. However, it is crucial to adopt strategies like SIPs (Systematic Investment Plans) or STPs (Systematic Transfer Plans) to spread risk over time. The technology sector’s inherent volatility alongside macroeconomic conditions calls for a measured approach.
“Investors should carefully evaluate their objectives, do thorough research, and remain aware of their investment horizon,” Shinde concludes.
Conclusion: As technology-based mutual funds navigate through difficult waters due to an array of economic pressures, the advice remains clear—investors can seize this moment as a strategic entry point but should do so with caution and a calculated approach.
Keywords: Technology-based mutual funds, investment strategy, SIPs, STPs, market analysis, long-term investing, risk management, economic trends.
Hashtags: #MutualFunds #Investing #Finance #SIPs #STPs #TechnologyFunds #MarketTrends
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