While the Sensex has slipped from the 12,000 levels to below the 10,000 level in a matter of a few weeks, the downtrend has not spared any sector. Even the dollar strength has not spared export-focused sectors like technology as no one had bargained for the sudden reversal of trends in the currency.
In fact, no sector has been able to withstand the market tide which has been regularly wiping away the gains made by investors over a long period of time. While one may argue that betting on a single sector may not be the solution and it is better to stick to stocks in general, investors can use certain sectors for their longterm portfolio which can help them in earning good returns over a period of time. However, the golden rule is that even if you choose your sector for long term, keep an eye on its prospects and performance and make it a habit to review your choice. For mutual fund investors, diversified mutual funds have proved to be the best option for a long time simply because these funds churn their sectors at regular intervals . With diversified funds, with large-cap focus having proved better performers when compared with sector funds in bear market, investors can safely allocate a larger portion for them at present. But, those with a good risk appetite can look at sectoral funds in the current scenario as many stocks in sectors like infrastructure, power, technology and even capital goods have lost sheen. While they have the potential to earn good returns in bullish market conditions, these funds are also exposed to structural vagaries. While aggressive investors can allocate a portion of their corpus for sector funds it is a strict 'no' for someone who can't stomach the volatility associated with such funds. Deciding to invest in a sector may not be challenging but choosing the sector definitely is. One of the ways to pick a sector is to look at its medium-term prospects. Though sector funds are riskier than diversified funds, invest in a sector which has a good potential in the near term. Hence, the investment tenure too should be a minimum of 2-3 years like diversified funds. While choosing a sector, avoid investing into a sector which has seen a sharp rise in a short span of time. Though retail investors always tend to chase sectors which are in the news or companies which have seen a sharp upside, such a strategy will only increase the waiting period for investors. |
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