Pharma funds have given good returns in the last one or two years. I would like to invest ₹5,000 via a SIP in pharma funds for two or three years. What is your view?
- Manivannan G
We do not recommend sectoral funds. Over any period of time, the stock markets always favour some sector of the economy more than others. Therefore some set of sector-specific funds are always doing better than others. Over the last many years, the favoured sector has rotated from one to another. Funds managers of a sectoral mutual fund are restricted to invest in the same sector even if the sector is not performing well. Thus, investing in a sector-specific fund is risky. Choose a diversified fund based on your risk tolerance and investment horizon. Invest in equity funds only if you have five years or more in hand.
This article was originally published on October 13, 2015.
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