Monthly SIP Of Rs. 5000 In This MF Became 4.99 Lakh – Should You Invest?

After a lackluster year, investors are not in a hurry to catch the IT (Information Technology) stocks, even as shares of most IT companies are trading at a super low valuation.

Valuation Of IT Stocks Is At Multi-Year Low.

Shares of IT giants like Infosys, which were trading at a P/E of around 38 as of December 2021, are trading around a P/E of 24 as of March 2023.

The story of another IT giant, TCS, is also similar.

Shares of TCS or Tata Consultancy Services Limited were trading around a P/E of 40 during September 2021, which are now trading at a P/E of 28.

Even the midcap IT stocks like Tata Elxis and L&T Technology Services, on an annual basis, are down around 20% and 30%, respectively.

And recently, the fear around the sector rose even more as banks like SVB and Credit Suisse collapsed.

And it seems like bad news around the IT sector won’t stop coming anytime soon.

But as the World’s Greatest Investor, Mr. Warren Buffet said – “Be fearful when others are greedy, and be greedy when others are fearful.”

So how can an ordinary retail investor invest in IT stocks with very little money?

The easiest way for a retail investor to invest in the IT sector is through Sectoral Funds like the Tata Digital India Fund.

So in this article, we will discuss the Tata Digital India Fund in detail. And we will also see how much return we will generate from a monthly SIP of Rs. 5,000/- in this mutual fund.

Basic Information About The Tata Digital India Fund

Tata Digital India Fund is a Thematic/Sectoral Mutual Fund that primarily invests in shares of IT companies listed in the Indian stock market.

As of 24th March 2023, the NAV of Tata Digital India Fund stands at Rs. 34.71/-, while the Asset Under Management (AUM) stands at Rs. 6,765.81 Crore.

As of date, the portfolio of Tata Digital India Fund consists of 36 IT company stocks. Out of which some are foreign IT stocks. To name some – Alphabet (commonly known as Google), Amazon, Adobe, Microsoft, etc.

But most stocks in the fund’s portfolio are big names in the Indian IT sector.

Asset Allocation Of The Tata Digital India Fund

The Top 10 holdings of the fund are Indian IT stocks, with Infosys at the first position with an AUM allocation of 24.6%. Second, comes TCS with an AUM allocation of 19.1%. And the third is HCL Technologies which has an AUM allocation of 8.6%.

As the top 3 stocks in the portfolio have an asset allocation of 52.3%, it looks like the Tata Digital India Fund is a top-heavy and large-cap-oriented mutual fund.

Advantages and Disadvantages Of The Tata Digital India Fund

Such a narrow and focused asset allocation, that too, of a thematic/sector-specific mutual fund like the Tata Digital India Fund, has both advantages and disadvantages.

The advantage of allocating more than 50% of the fund’s AUM toward the top 3 large-cap IT stocks might make the fund resilient, as large-cap stocks fall the least during a bear market.

But the disadvantage is – As Tata Digital India Fund is a thematic/sectoral mutual fund, such a focused asset allocation towards the top 3 stocks makes the portfolio less diverse.

Minimum SIP Amount Of Tata Digital India Fund

The minimum amount allowed for monthly SIPs in the Tata Digital India Fund is Rs. 150/-.

Minimum Lumpsum Investment Amount Of Tata Digital India Fund

The minimum investment amount for the 1st Lumpsum/One-Time investment in the Tata Digital India Fund is Rs. 5,000/-. From the 2nd Lumpsum/One-Time investment onwards, people can invest as low as Rs. 1,000/-.

What Is The Expense Ratio Of The Tata Digital India Fund?

The Direct and Growth variant of the Tata Digital India Fund has an Expense Ratio of 0.31%. While the Regular version, generally sold via mutual fund agents or agencies, has an Expense Ratio of 1.95%.

We at Money Premier suggest our readers invest in mutual funds using Direct Funds only if they know and understand the risks and rewards associated with mutual fund investments.

If not, then please take the help of a certified financial/investment expert.

Returns Generated By The Tata Digital India Fund

Returns On Your Lumpsum/One-Time Investment In Tata Digital India Fund

If an investor had invested a sum of Rs. 1,00,000/- in the Tata Digital India Fund (Direct and Growth) 3 years ago, now the value of that 1 Lakh Rupees investment is Rs. 2.74 Lakh.

It is a 40.06% annualized rate of return.

An investment of Rs. 1,00,000/- in the Tata Digital India Fund (Direct and Growth) 5 years ago grew at an annualized rate of 22.28% and is now worth Rs. 2.73 Lakh.

Monthly SIP Of Rs. 5,000 In Tata Digital India Fund

The total investment value of a monthly SIP of Rs. 5,000 in the Tata Digital India Fund started three years ago would amount to Rs. 1,80,000/-.

The investment grew at 16.48% per year and is now worth Rs. 2.29 Lakh.

If you had started a monthly SIP of Rs. 5,000/- in the Tata Digital India Fund (Direct and Growth) 5 years ago, the total invested amount would be Rs. 3,00,000/-.

For five years, the investment in the said IT fund grew by 20.55% per year and is now worth Rs. 4.99 Lakh. The total profit percentage on the investment is 66.63%.

Should You Invest In The Tata Digital India Fund?

A young investor with a long investment horizon should invest in the Tata Digital India Fund as the investor has multiple working years ahead to recoup if any loss occurs.

And a long investment horizon gives ample time for the investment to recover if the fund underperforms.

Investment in a thematic or sectoral mutual fund like the Tata Digital India Fund is focused only on a single sector, so the question of diversification goes right out of the window.

And any drastic changes in the whole sector can seriously hamper your investment returns. And it also makes sectoral mutual funds very volatile.

An example related to the Tata Digital India Fund would be the year 2022 when inflation in Western countries like the US or the UK rose sky-high.

While answering a question related to this exact IT sector mutual fund, an expert said – “Small cap funds, multi cap funds, mid cap funds, and IT funds are meant for high risk investors, whereas large cap funds and flexi cap funds are recommended for conservative and moderate investors respectively.”

How Much Should You Invest In A Thematic/Sectoral Fund Like The Tata Digital India Fund?

A thematic or sectoral mutual fund like the Tata Digital India Fund is super volatile as the portfolio of such a fund has exposure to just one sector.

In the case of Tata Digital India Fund, it is the IT sector.

Such a sector-specific portfolio makes thematic/sectoral mutual funds the least diversified among all the types of mutual funds.

Though a sectoral fund might give handsome returns over a specific period, the risk in a fund like the Tata Digital India Fund always remains high.

So an investor must not invest more than 5% to 10% of their portfolio in a thematic/sectoral mutual fund like the Tata Digital India Fund.

And a sectoral mutual fund investor needs to know the amount of risk and volatility they can handle.

That was it.

We hope this article about the Tata Digital India Fund was helpful to you.

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And as usual, in the end, we will say –

Good Luck and Happy Investing! 😊

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