What are Technology Mutual Funds and how they work?

This article delves into the workings of Technology Mutual Funds, shedding light on their mechanisms and the benefits they offer to investors.
4 mins
17 Feb 2024

Before understanding technology mutual funds, let us first understand what sectoral mutual funds are.

Sectoral mutual funds are mutual funds that invest in a specific sector or theme. They invest in both equity and debt of companies from specific sectors. These funds provide investors with the opportunity to target their investments towards a particular area of the economy, such as technology, pharmaceuticals, banking, or energy. Sectoral funds offer a focused approach, which can be beneficial for investors who believe in the growth potential of a particular industry. These funds are usually recommended for highly informed investors.

Now, let’s understand what are technology mutual funds?

Technology mutual funds are a subset of sectoral funds that primarily invest in companies operating in the technology sector that have high growth potential. These funds offer investors a chance to participate in the growth and innovation brought about by technology companies. The portfolio of a technology mutual fund may include a mix of businesses engaged in software development, hardware manufacturing, internet services, telecommunications, and various other technology-related fields. The objective of these funds is to generate long-term capital appreciation by investing in technology and technology-dependent companies.

How to invest in technology mutual funds?

Investing in technology mutual funds is relatively simple. You can follow these steps:

  • Choose a mutual fund house: Select a reputable mutual fund house that offers technology mutual funds.
  • KYC compliance: Ensure that you are KYC (know your customer) process is complete.
  • Select the fund: Pick the technology mutual fund you wish to invest in. Review the fund's investment objectives, past performance, and expense ratio.
  • Invest: You can invest either through lumpsum investments or systematic investment plans (SIPs). Lumpsum investments involve a one-time investment, while SIPs allow you to invest a fixed amount regularly.
  • Monitor your investment: Keep an eye on your investment's performance and make adjustments if needed.

Frequently asked questions

Is it good to invest in technology mutual funds?

Investing in technology mutual funds may be a good endeavour if you have a high-risk appetite and a long-term investment horizon.