A cursory look at the fund category returns section on our website will mostly point to sector funds topping the charts. At the moment, both FMCG and pharma sectors have posted returns which will tempt investors to put their money on these funds. Both of these are defensive sectors which tend to drop less during market downturns and find an increase in investor interest during such phases.
But should one invest? Investing in sector funds is recommended only to those investors with well-diversified portfolios and experience in investing. Moreover, such investments should be undertaken only to fill a gap in an existing equity portfolio or to emphasise a sector in the portfolio that one is very optimistic about. Funds in the diversified equity category have exposure to pharma sector which tends to mirror the healthcare weightage of the benchmark Nifty index. The advantage in doing so is the diversification that one gets and also the relatively lower expenses that investors incur.
The expense on a pharma fund is similar to that of a diversified equity fund. The call to exit or enter a sector fund is based on research and outlook adopted by diversified equity fund managers, whereas with sector funds this call is left to investors. Investors will be wiser to avoid paying fee for an exercise they can address themselves.
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