'This mutual gave 70% returns in one year, invest now'. Did you get this e-mail?1 min read . Updated: 02 Nov 2020, 01:15 PM IST
Sectoral funds are high risk funds.
Some mutual fund houses are trying hard to sell their sectoral or thematic schemes due to the abnormally high returns delivered by them in the last one year. Fund houses are trying to lure investors by sending them e-mails to invest in such funds. Pharma, gold and technology sector mutual funds have leaped by 52%, 30% and 39% on an average in the last one year. The toppers in these category of funds have delivered even higher returns. For an instance, a few pharma funds have grown by over 70%. The big question: Should you get lured? Should you expect similar returns going ahead? Are these schemes suitable to meet your goals?
Well, not really. The data quoted by the fund houses is true but there is no guarantee of similar returns going ahead. Sectoral funds are high risk funds. Unlike a diversified equity fund, a fund manager cannot move out of a particular sector or theme even if the sector is underperforming.
Sector funds are not for everybody
Only those investors who understand the risks involved in sector funds and those who know how to play defensive can invest. Retail investors should stay away.
To invest in sector funds, investors must know when to enter and exit. If you have an appetite for high risk funds and still want to invest in a particular sector, don't invest more than 10% of your portfolio in it.
High-return sectoral mutual funds to meet goals?
Sectoral funds are not recommended for non-negotiable goals like, child's education, marriage, retirement, or any other goal which you would not want to risk. Experts ask retail investors to invest in diversified funds, basis time in hand and risk profile for unavoidable goals. A diversified fund can switch out of any stock or sector and enter a better performing one at any point of time.