The Tata Digital Fund is a sectoral fund focused on tech firms. That is a new fund, and it seems there was the right timing for the launch. While returns look good overall, they are slightly better than the benchmark-nifty IT TRI. So far, the fund has gone into a bull phase too much, and we have no idea how this will happen in the inevitable bear period.
You will do a big favor with your financial plan by first choosing a category of mutual funds of your choice and then looking at successful long-track funds in that category. Do not see only return alone.
Because Tata Digital Fund is a sectoral/thematic mutual fund, sectoral funds are riskier than general diversified equity funds as they invest only in a sector, which in this case is IT / technology.
It is a super-risky fund, so invest in it only if you have the right knowledge about the market and if you are very positive about the IT sector in the long run.
The main goal of investing in mutual funds is to diversify the portfolio by buying at least 40 stocks in a well-diversified fund. But if you are investing in a sector fund with just 15 stocks, then you are inviting higher risk. In the next few years, IT stocks may or may not trade as it works on a cycle.
It is a sector fund focused on the IT sector. Over the past year, IT has experienced a resurgence making it one of the best performing segments on the market. It is partly due to IT firms’ dollar earnings and the rupee falling against the dollar, increasing the rupee value of their earnings.
Sector funds are usually hazardous, so invest only when you are sure about the prospects of the IT sector and are ready to take the risk involved. Some funds, such as Aditya Birla Sun Life New Millennium, ICICI Prudential Technology, and Franklin Innovation Fund, may also be listed.
The fund gives good returns. It is also from a reputed fund house that manages some other highly established funds.
In my opinion, there is no harm in investing except that every investment option has some pluses and minus points.
Indeed, this is not for a long-term set-and-forget plan. But it could give good returns in a short time. Probably about a year.
Investment is a personal choice. If everyone chose the same thing, there would never be a market for buyers and sellers.
Although there are not half measures. There is no point in allocating 2 percent to a portfolio. It’s going to be a waste of time because it can’t hurt, but even then, if it’s a great idea, it won’t matter.
My preference is for the tata digital India fund direct growth, as it has a low exit hold and limited exit length.
It is a small fund, so they are more flexible, and it is okay to invest in market conditions.