Sector funds carry high risks and are meant for individuals with a higher risk appetite
10-Jan-2017 •Research Desk
I want to start SIP in Pharma and IT mutual funds for the next 5 years as these are currently giving negative return and hence the risk is lower in current situation. Please advice.
Sector funds are riskier and more volatile as sector-specific developments can have a much bigger influence on your returns. Sector fund investors need to actively track those sectors and take a call on whether they should remain invested or move out. At best, sector funds can play a supplementary role in an investor's portfolio with a small allocation in case you are upbeat on a particular sector. But most investors can do without them.
Investment needs of most individuals are well fulfilled by diversified equity funds which have the flexibility to invest across sectors. They offer a convenient and hands-off approach to investors as the decision to move in and out of specific sectors is left to professional fund managers.