5 Best Technology Mutual Funds (2023)
Technology Funds are sectoral mutual fund schemes that invest in companies’ assets in the technology sector. This mutual fund primarily invests in the stocks and debt securities of companies that provide technology-based products or services. Due to the higher asset allocation to equities, it is typically an Equity Fund.
This post lists out the 5 best technology mutual funds you can invest in, why invest in this type of sectoral mutual fund, who can invest, how and when to invest, and taxation. Read on!
List of 5 Best Technology Mutual Funds
| S No. | Funds | AUM (Rs. – Cr) | 1 Year Returns (%) | 3 Year Returns (%) | 5 Year Returns (%) |
| 1. | ABSL Digital India Fund | 428 | 12.22 | 21.24 | 11.53 |
| 2. | Franklin India Technology Fund | 246 | 10.95 | 17.92 | 9.55 |
| 3. | SBI Technology Opportunities Fund | 155 | 9.01 | 18.61 | 8.43 |
| 4. | Tata Digital India Fund | 390 | 3.45 | 22.23 | – |
| 5. | ICICI Pru Technology Fund | 409 | -0.98 | 17.46 | 8.49 |
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Why Invest in Technology Mutual Funds?
The market for PCs and smartphones is already saturated, growth is expected to be slow. However, newly evolving sectors such as cloud computing and AI (Artificial Intelligence), which are disrupting traditional technologies, are taking over and will be the future golden geese.
Gordon E. Moore, the co-founder of Intel, predicted the technology sector’s growth in 1965. According to his ‘Moore’s Law,’ we will have the ability to double the number of transistors on a single chip every two years. And while a single chip may not appear to be much, the potential for growth and disruption is mind-boggling when applied to the technology sector as a whole! And, as any good investor knows, disruption creates new investment opportunities, which is why technology mutual funds are in such high demand right now.
Who Can Invest in Technology Mutual Funds?
- If you have a high-risk tolerance, you should consider this fund. All industries have ups and downs, and due to the investment mandate, a fund must remain invested in technology-based company stocks/securities even when the sector is performing poorly. When fund managers have exposure to various industries, they can shift funds from underperforming sectors to serving ones. The volatility of technology funds is higher than that of diversified funds.
- It is also appropriate for investors who are more knowledgeable about markets and macroeconomic situations. A Sectoral Fund is an option if you have patience and an eye for tracking the growth of various market sectors. You should check if technology-based stocks and funds perform well and are worth investing in. Technology, particularly information technology, has been one of the most thriving sectors in recent years, with nearly all global IT firms establishing themselves in India. It is also a popular investment sector with tremendous growth so that you can invest in Technology Funds right now.
- If you are willing to commit to long-term investment, any sector requires adequate development time. Technology Funds experts do not recommend short-term investments.
How should you invest in Mutual technology funds?
- Offline mode of investing – If you are unsure of your knowledge, you can invest through a broker. Investing in a fund through a broker, on the other hand, will make you eligible for investments through regular plans that offer different returns and expenses in investment. If you want to invest in the fund independently, you must go to the nearest branch of your fund’s AMC. Remember to bring the following documents:
- Identity Verification (Aadhar Card)
- Cheque cancelled
- Photos in passport size (around 4-5)
- KYC documents for PAN Cards (for KYC verification)
- Online mode – If you do not want to add commissions or brokerage fees to your expenses, you can visit online investment platforms such as Paisabazaar.com, where you can choose and compare more than 1,700 funds-all in one place rather than going through the lengthy process of visiting the website of each AMC and then choosing from them. You can see the Navi mutual fund website and gain more knowledge on mutual funds.
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When to Invest in Technology Mutual Funds?
According to Value Research, a mutual fund tracking firm, technology, or IT sector funds provided an average return of 67 percent in 2021. These funds have returned a whopping 67 percent (YTD). This year, IT funds topped the performance chart.
This year, the ICICI Prudential Technology Fund returned 77 percent. Seven of the eight IT schemes that have completed a year of operation provided more than 60% returns in 2021. Franklin India Technology Fund has one scheme. So the straightforward answer is if you want to invest in a Technology mutual fund, the time is now!
Taxation on Technology Mutual Funds
Technology Funds invest heavily in Equities, and if 65% of the corpus is allocated to equities, the fund is treated and taxed as an Equity Fund. If debt securities constitute 65% of the portfolio, they are debt-oriented and taxed.
- If taxed as an equity fund: If an investor makes a capital gain of $50000 on an equity fund investment, a 15% Short Term Capital Gains Tax will be levied if the amount is withdrawn within one year of acquisition. The tax due would be $7500.
- If taxed as a Debt Fund: If an investor makes a capital gain of $50000 on an investment in a mutual debt fund and withdraws the amount before three years, Short Term Capital Gains Tax will be levied, based on the investor’s income tax bracket. Fifty thousand would be added to the investor’s taxable income and taxed accordingly.
If these funds are held for more than a year, their long-term capital gains are taxed at 10% if the revenues exceed Rs. 1 lakh (as per the latest budget of 2018). They are classified as debt funds if their portfolio is debt-oriented and contains at least 65 percent debt securities. It means that if the fund is held for 36 months or more, the long-term capital gains tax will apply. However, the majority of technology funds are equity-focused.
Final Word
Because the technology sector is constantly expanding, some of your investments may face some short-term headwinds. However, experts believe that technology mutual funds will outperform global equity funds shortly. As a result, if there is one sector you should watch, this is it! If you are ready to invest in mutual funds, go to Navi Mutual Funds and get started!
Disclaimer: Mutual Fund investments are subject to market risks; read all scheme-related documents carefully before investing.
FAQs
Ans: There is no such thing as the best time to invest in mutual funds. Individuals can invest in mutual funds whenever they want. However, it is always preferable to purchase the funds at a lower NAV rather than a higher price. It will not only maximize your returns but will also result in more significant wealth accumulation.
Ans: PPFAS MF is India’s fastest-growing major mutual fund house. PPFAS had the highest AUM growth among the top 30 AMCs in FY 2021, at 178 percent. Its AUM increased from Rs 3,138 crore to Rs 8,720 crore during the fiscal year.
Ans: Many debt mutual fund managers are concerned about the Union Budget 2022. They believe that a larger-than-expected fiscal deficit and increased borrowing will pressure the bond market and shortly reduce the returns from debt mutual funds.
Ans: The 9:30 a.m. to 10:30 a.m. Eastern time (ET) period is frequently one of the best hours of the day for day trading, with the most significant moves occurring in the shortest amount of time.
Ans: The vast majority of mutual funds are liquid investments, which can be withdrawn at any time.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
