Mutual Funds pool money from investors and invest in Stocks, Bonds, Money market instruments and other Govt Securities. There are various types of Mutual Funds and there are several Mutual Fund schemes in each category. I have already provided more details on types of mutual funds and on how to pick-up the right mutual fund in one of my previous posts.
While I was discussing “Where to invest”, I felt I should also discuss “Where not to invest”. Investors commonly make mistakes. One among them is investing in Technology mutual funds.
Why an investor SHOULD NOT invest in Technology sector mutual funds?
Technology stocks and Technology mutual funds are not offering good returns in the recent 2-3 years. Though a few among them are able to minimize the losses, majority of the technology stocks are consistently giving negative returns over the last 2-3 years.
Where does Technology sector mutual funds invest ?
These mutual funds invest in Technology blue chip equity stocks, Technology midcap and Technology small cap stocks.
What are the risks involved ?
Below are the major factors which are effecting the IT companies
1) Multi national companies are cutting down their budgets due to recession / slow down in the economy
2) Governments are taking serious steps to improve the employment in their country instead of outsourcing to low cost countries like India, China, Malaysia etc.,
What are the returns provided by mutual funds in this sector?
|MF Scheme|| Aum|
|1 Year||2 Years||3 Years||5 Years|
|ICICI Pru Tech fund||106||0%||7%||25%||1%|
|SBI Magnum IT fund||41||-5%||1%||19%||-3%|
|Franklin infotech fund||114||-6%||2%||18%||3%|
Conclusion: Technology sector mutual funds are providing negative returns/losses and I felt this is one of the investment options which an investor should stay away in the current economic scenario.
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