Investments in Sector Funds

Having discussed various aspects of Sector Fund let us now look into the investments options & few basic rules to be followed while investing in it:

Do not limit your concentration in single sector:

Diversify your exposure while investing in sector funds as they are volatile & have high risk involved. So take small portion in number of funds from several highly ranked sectors. 

Don’t hold on to funds in the hope of extra gains or to revive losses:

It is not advisable to hold on to funds that have performed badly in the hopes that they will come back or not to sell funds that have made gains at the right time. Instead keep tracking the market & look for better places to put money into.

Stick to your discipline during volatility:

Sector funds are highly volatile & are likely to influence investors with their market movements. In good times the outsized gain might influence the investors towards one sector & similarly unfavorable times might drive investors to opt out of it. But it is best to stick to the basic strategy devised initially & opt out only when there is better option to make money

Keep reviewing over the time:

It is important to keep track of the performances of your investment & re-balance your allocation according to your changed circumstances. So stick to your discipline but review them according to changed market conditions

Invest in relatively large-sized sector funds with optimistic track records:

Going by the trends of merger of various mutual fund schemes, it is better to go with a large sized fund with meaningful presence in the category. Also it is equally important to look at the sector's prospects, track record of the fund manager and performance of the scheme, among other parameters.

For more information on various strategies to follow while investing in sector funds consult our experts at www.karvywealth.com