Special Report
MF page - 12
Strategy
In addition to this, you can also apply a simple strategy of 'revision to mean'. This means investing in sectoral funds that have
performed worst last year and may turn out to be the best performer this year. Hence, you identify the worst performing sector of
this year and invest in the sector at the start of the next year. We see this 'strategy' generating returns superior to most of the
sectoral funds. Since the start of the year 2009 till the end of 2018, the strategy has generated returns better than most of the
'sectoral funds', including frontline indices like 'Nifty 50'.
Investing in a sector funds can be a risky proposition as the investment is very much concentrated. These funds invest in
companies belonging to that particular sector only and are, therefore, more volatile than other sectors. Hence, a sector fund
should never be your core fund which you hold for the long term. It can be a part of your satellite fund, where you do tactical
allocation. Moreover, it should never constitute more than 10% of your total portfolio. A sectoral fund can juice up your returns,
however, it is best suited for investors having high risk appetite. DS