Through ETFs, an investor can invest in a basket of stocks at a fraction of cost and is relatively better placed when compared to direct investing.
The IT sector has been gaining popularity in recent times – especially with the adoption of digital and cloud technologies due to the pandemic. Industry experts say this trend is likely to continue over the next few years.
Experts say, one of the advantages of investing in these mutual funds is that one can gain access and exposure to various technology stocks in just one fund.
Chintan Haria, Head- Product Development and Strategy, ICICI Prudential AMC, says, “Technologies such as cloud computing and data analytics are offering new opportunities due to which, the IT sector is likely to be on a growth path as technology spends would continue to gain share for every corporate.”
Additionally, digital technology adoption has penetrated almost every sector. Hence, experts say investors could look at this sector for investment. Individuals, with an investment horizon of a minimum of 3-5 years should invest in this sector, as this theme is likely to grow in the near term which is a positive for the sector.
What are the various ways of investing in the sector?
Direct investing, experts say is one of the ideal options to invest in the technology sector. Having said that, note that direct investing involves substantial stock-specific risk. Another way of investing includes investing through sector or thematic funds where the risk is diversified, and the stock selection is done by experienced fund managers.
Haria, of ICICI Prudential AMC, says “Investors can also invest through IT ETFs such as ICICI Prudential IT ETF which tracks Nifty IT TRI index consisting of almost all the major players in the country.”
Factors to be considered while investing in IT ETFs
ETFs, combine the trading flexibility of a stock with the diversification and low costs of a mutual fund. Among the factors to consider while investing in ETFs is high tracking record, liquidity, lower tracking error, low expense ratio.
Haria adds, “Through ETFs, an investor can invest in a basket of stocks at a fraction of cost and is relatively better placed when compared to direct investing.”