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There are many sector-specific funds available in the market. Should investors consider them?
- Anonymous
When you compare mutual funds, you would always see the fund of a particular sector doing well, as sectoral funds either stay at the top or at the bottom.
Around two to three years back, people wanted to invest in pharma funds, which were at a peak during that time. But in today's time, they are at the bottom. Sector funds invest in companies belonging to that particular sector only and therefore, they are quite risky. So, it is not wise for a retail investor to invest in a sectoral fund.
Nevertheless, as these funds are available in the market and there is always a sector giving extremely high returns, people keep investing in them. But one should straightaway get alarmed of the high risk involved as soon as he/she sees extraordinarily high returns. These high returns in itself are a warning bell.
This article was originally published on April 12, 2019.
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