The IT sector got a reality check on Monday after technology giant Infosys plunged 9.40% on Monday, its biggest single-day drop in three years, after it posted weaker-than-expected March quarter earnings. A cautious outlook prompted investors to dump technology stocks. As said before, the IT fund category also felt pressure as many leading technology stocks were battered. However, IT funds showed signs of recovery as the category was down only 0.48% on Tuesday.
According to market pundits, the IT sector is likely to feel the pressure for sometime. Many analysts have been warning that economic woes in developed countries will put pressure on the IT sector. The IT sector got a major boost during the covid years as the world was shifting to the online mode. According to analysts, the slowdown and likely recession may put pressure on the sector as it may face a squeeze on IT spending.
Should long-term investors worry about their investments in IT or technology funds? IT funds are not recommended to new or inexperienced investors as these schemes (or any sector schemes, for that matter) can go through phases and there may be prolonged bad or volatile phases. Regular investors will find it difficult to handle. However, investors who have a high-risk appetite and long investment horizon can invest in these funds. However, don’t go overboard like some investors did during the covid years. Invest only 10-20% of your total portfolio in these schemes.
If you need numbers to convince you, take a look at the long-term returns offered by the category and schemes. The IT fund category offered 32% returns in three years, 17% in five years, and 18% in 10 years. It clearly shows that the category has the potential to offer you higher returns over a long period of time – provided you are ready to tolerate volatility and a lean phase for sometime. Don’t take the risk and volatility lightly. The IT fund category lost 17% in the last one year.
