Mutual fund investors warming up to sector funds | Economic Times

Most retail investors used to avoid investing in sector schemes or thematic schemes. The conventional wisdom stipulated that sector schemes are meant for sophisticated investors who know intimately about these sectors . They should also manage to get in and out of these schemes at the right time. However, many investors have discarded this wisdom. They reason that when these schemes are doing as well as other equity schemes, why would individual investors avoid them.According to value research, technology sector offered around 105% returns in one year. Another theme, energy gave around 102% during the same period. The banking sector offered around 88%, while the infrastructure funds offered around 85% returns in the one year. “Some investors are totally impressed with the huge returns offered by sector schemes. All these equity schemes have offered the higher return in the same year. That has impressed them even more,” says a mutual fund who doesn’t recommend investing in sector funds. Advisors say these schemes may be behaving in a certain way due to the market conditions in the last two years. Once Covid-19 is under control and the central banks abandon the loose monetary policy, investors would learn that all sectors are not likely to perform better at the same time, say advisors.Most investors used to stay away dim sector schemes because the general consensus was retail investors should not get into these schemes. They extremely risky and it is equally important to time the entry and exit in them. However, things started to change when everyone became bullish on Pharma and IT in the aftermath of Covid 19 upheaval. Now, investors are bullish on most sectors.“Investors should stick to basics and should not become adventurous for extra returns. The current phase may be aberration. The equity market will get back to normal and all the discarded rules will once again become relevant,” says a mutual fund advisor.