We have always heard of folks in websites/TV mentioning that one should look at diversified MF for investment.
One thing I always hear/read is that almost everyone has one cardinal rule - NEVER INVEST IN SECTOR FUNDS.
Q. What are SECTOR FUNDS?
A. SECTOR FUNDS are funds that invest in a specific sector (e.g Banking, Pharma etc).
Q. Why shouldn't one invest in SECTOR FUNDS?
A. The common thinking is that one cannot time the markets and no one can guess who will ride in the next bull run. There have been bull runs dominated by IT, FMCG, Banking (last one) and Pharma (recently 2014-2015).
Thus, since one cannot predict which sector will be the leader, investment in SECTOR FUND can go awry.
Contrary to the popular belief, I believe ONE SHOULD INVEST IN A SECTOR FUND.
Huh? Why?
Because, a well diversified MF will be heavily dependent on the stocks it picks.
If one is invested in a SECTOR FUND, he/she gets the following advantages:
I believe in the following (and I could be wrong):
The only one SECTOR FUND that evolves doubt is INFRASTRUCTURE FUND. However, with Mr Modi's 100 smart city plan, INFRA should get a push and this could also become a performer.
So, apart from your normal investment, I strongly believe SECTOR FUNDS should be invested in.
Your thoughts?
One thing I always hear/read is that almost everyone has one cardinal rule - NEVER INVEST IN SECTOR FUNDS.
Q. What are SECTOR FUNDS?
A. SECTOR FUNDS are funds that invest in a specific sector (e.g Banking, Pharma etc).
Q. Why shouldn't one invest in SECTOR FUNDS?
A. The common thinking is that one cannot time the markets and no one can guess who will ride in the next bull run. There have been bull runs dominated by IT, FMCG, Banking (last one) and Pharma (recently 2014-2015).
Thus, since one cannot predict which sector will be the leader, investment in SECTOR FUND can go awry.
Contrary to the popular belief, I believe ONE SHOULD INVEST IN A SECTOR FUND.
Huh? Why?
Because, a well diversified MF will be heavily dependent on the stocks it picks.
If one is invested in a SECTOR FUND, he/she gets the following advantages:
- In the BULL RUN, you would get max returns (e.g in the last bull run, MFs like Reliance Banking fund were outperformers).
- FMCG fund will always come under defensives.
- Thus, one would have a benefit of one defensive and one out performing fund.
I believe in the following (and I could be wrong):
- Banking has to grow with time as the economy improves.
- Pharma has to grow with time with our ever growing population
- FMCG will be a strong defensive fund to provide anchor to your investments (expect good dividends)
- IT is a dark horse and with stronger dollar, could be the surprise in the pack.
The only one SECTOR FUND that evolves doubt is INFRASTRUCTURE FUND. However, with Mr Modi's 100 smart city plan, INFRA should get a push and this could also become a performer.
So, apart from your normal investment, I strongly believe SECTOR FUNDS should be invested in.
Your thoughts?
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