Fund selection - Sector Funds

[superman]

Hi

I am entering the world of MF

I have already HDFC Top 200 which is a diversified fund.

I looked for other good MF's in diversified region but on analyzing their portfolio breakup/spread,the top 4 sectors in all of them are nearly same.. Finance,Energy,Technology and Health Care Sector...

I feel there is no point in having MF's involving nearly same weight age of sectors ...

So i am thinking of entering sectoral MF's ...they are high risky MF's for sure but i guess it will add true diversification in my MF portfolio ..

So guys any good sectoral MF's which are under performing now..
I am a long term holder so no problem if the sector is in bad shape now ..Actually its good if its in bad shape

Thanks in Advance

 

[nikrod]

Hi

I am entering the world of MF

I have already HDFC Top 200 which is a diversified fund.

I looked for other good MF's in diversified region but on analyzing their portfolio breakup/spread,the top 4 sectors in all of them are nearly same.. Finance,Energy,Technology and Health Care Sector...

I feel there is no point in having MF's involving nearly same weight age of sectors ...

So i am thinking of entering sectoral MF's ...they are high risky MF's for sure but i guess it will add true diversification in my MF portfolio ..

So guys any good sectoral MF's which are under performing now..
I am a long term holder so no problem if the sector is in bad shape now ..Actually its good if its in bad shape

Thanks in Advance

Telecom sector is going through tough time right now. Only telecom funds I know is JM Telecom sector.

You can also consider banking sector since it is in bearish phase due to intrest rates & liquidity concerns. There are several good banking funds in market namely Reliance Banking, JM Financial Services Sector, UTI Banking Sector, ICICI Pru Banking and Financial Services, Sahara Banking and Financial Services

 

[niloy_kumar]

Hello Superman

My 2 cents...

Its good thing that you have gone through the stock selection. If you look at top performing MF from any website and go through their portfolio you will see almost all of them have same composition (equity/equity diversified). I believe the rest of the portfolio makes the difference.

as NIKROD suggested

BANKING

Reliance Banking, JM Financial Services Sector, UTI Banking Sector, ICICI Pru Banking and Financial Services, Sahara Banking and Financial Services

(banking stocks has given good returns in last 3 year period)

You may also look at POWER

Reliance Power

or at CAP-EX

Sundaram CAP-EX

or at Infrastructure

Tata Infrastructure etc...

or GOLD ETFs

THE only PROBLEM with sector schemes are if the returns dont come after 3-5 years you feel like "WHAT a BLUNDER I DID" and if the returns are phenomenal then you are on top of the world.. I believe the risk can be mitigated to an extent by doing a SIP and by studying returns on a 3-5 yr since Funds with same name from diff AMC will give diff returns. But again you really need time on your side for the returns to roll in..

 

[nikhilfake]

The logic is faulty. The sectors that you've mentioned are really , really diverse. I can have two funds A and B , with A investing in Upstream Oil companies because I believe Oil prices are going to increase soon, while B can invest in downstream Oil companies because I believe Govt. Controlled APMs are going away soon as suggested by KP Committee. On face of it , both funds are investing in Energy but the bets are totally different. The example could be more striking if you see that Energy also has power , gas and renewable companies. So my advice would be to compare stocks , not sectors.

Hi

I am entering the world of MF

I have already HDFC Top 200 which is a diversified fund.

I looked for other good MF's in diversified region but on analyzing their portfolio breakup/spread,the top 4 sectors in all of them are nearly same.. Finance,Energy,Technology and Health Care Sector...

I feel there is no point in having MF's involving nearly same weight age of sectors ...

So i am thinking of entering sectoral MF's.

So guys any good sectoral MF's which are under performing now..
I am a long term holder so no problem if the sector is in bad shape now ..Actually its good if its in bad shape

Thanks in Advance

 

[nikrod]

The logic is faulty. The sectors that you've mentioned are really , really diverse. I can have two funds A and B , with A investing in Upstream Oil companies because I believe Oil prices are going to increase soon, while B can invest in downstream Oil companies because I believe Govt. Controlled APMs are going away soon as suggested by KP Committee. On face of it , both funds are investing in Energy but the bets are totally different. The example could be more striking if you see that Energy also has power , gas and renewable companies. So my advice would be to compare stocks , not sectors.

To add some more details - Infrastructure theme is very diverse and everybody has his own definition. Infrastructure constitutes 70% market cap and excludes technology, telco & healthcare companies. Some AMC's include banking in infrastructure as well, as it provides funds to infra.

 

[superman]

Thank guys for the suggestion ...

The logic is faulty. The sectors that you've mentioned are really , really diverse. I can have two funds A and B , with A investing in Upstream Oil companies because I believe Oil prices are going to increase soon, while B can invest in downstream Oil companies because I believe Govt. Controlled APMs are going away soon as suggested by KP Committee. On face of it , both funds are investing in Energy but the bets are totally different. The example could be more striking if you see that Energy also has power , gas and renewable companies. So my advice would be to compare stocks , not sectors.

Thanks for the explanation .. I think you are right

 

[superman]

Got myself a Reliance Regular Savings Fund - Equity Plan small amount ..

 

[nsuresh_rasr]

I would suggest to avoid sector funds. Go for a good equity diversified fund instead. You bet on a particular sector and if it turns bad then you stand to loose. I think as an investor its not our job to look for which sector goes good, its the job of the fund manager.

 

[drsambu123]

As rightly said by nsuresh sectoral funds should be avoided as an individual invester. The sectoral growth will be predicted by diversified fund manager also. they also compete for the power, telecome etc sector... ( though not to the extend of sectoral funds). Once things(sectors) turns against us or expected growth is delayed we will stuck with that sector.. whereas in diversified funds we dont feel the impact..
Still u strongly want sectoral funds keep less than 20% of your portfolio