DSP BlackRock Technology Fund
HDFC Infrastructure Fund
Reliance Pharma Fund
Are a few examples of Sectoral or Thematic funds , as the names suggests , they are allowed to invest in specific themes only . for example a Reliance Pharma Fund , can invest in only pharma companies and cannot venture out to invest in say a Cement or a IT company
The problem with thematic funds is that , If in case the sector is going through a bad phase , even in that condition the Fund cannot invest in other sectors or even if the fund manager realises some other sector is going to perform better , he still cannot invest in that sector .
Suppose the "Pharma Fund" manager realises that "Banking Sector" is going to do better than pharma , still he will not be allowed to invest in "Banking"
By investing in a sectoral funds , you are restricting your money from getting invested in different better performing sectors
You can invest in a sectoral fund if you
In contrast a Diversified Equity Fund , has no such restrictions and can invest in any sectors they like and take advantage of growth in any or all of the sectors.
So i would suggest , avoid sectoral funds and stick with the Diversified Equity Fund , like the three i had suggest in my earlier post .
This is just a suggestion, as investing heavily in a Sectoral Fund could be akin to putting all your eggs in one basket
Image : FreeDigitalPhotos.net,Photographer: Ashley Cox
HDFC Infrastructure Fund
Reliance Pharma Fund
Are a few examples of Sectoral or Thematic funds , as the names suggests , they are allowed to invest in specific themes only . for example a Reliance Pharma Fund , can invest in only pharma companies and cannot venture out to invest in say a Cement or a IT company
The problem with thematic funds is that , If in case the sector is going through a bad phase , even in that condition the Fund cannot invest in other sectors or even if the fund manager realises some other sector is going to perform better , he still cannot invest in that sector .
Suppose the "Pharma Fund" manager realises that "Banking Sector" is going to do better than pharma , still he will not be allowed to invest in "Banking"
By investing in a sectoral funds , you are restricting your money from getting invested in different better performing sectors
You can invest in a sectoral fund if you
- Know for sure , with deep working knowledge of a particular sector , that for next year or two or more a particular sector would return phenomenal returns
- You are a very active investor , who will be tracking your investments very very regularly and have the foresight to exit a sectoral fund when you either spot other better sectors or see problems with the current sector
In contrast a Diversified Equity Fund , has no such restrictions and can invest in any sectors they like and take advantage of growth in any or all of the sectors.
So i would suggest , avoid sectoral funds and stick with the Diversified Equity Fund , like the three i had suggest in my earlier post .
This is just a suggestion, as investing heavily in a Sectoral Fund could be akin to putting all your eggs in one basket
Image : FreeDigitalPhotos.net,Photographer: Ashley Cox
No comments:
Post a Comment