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Home / Mutual Funds

Mutual Funds

Growth-Oriented Funds

Strategy: 

Funds' strategies differ greatly, from conservative funds that specialise in big company blue chip stocks to aggressive funds that invest primarily in fast-growing, small company stocks. 

Certain funds invest in international securities markets, or focus on specific industries or sectors such as public utilities companies.

Price Volatility: 

Funds that invest primarily in stocks generally will experience more price volatility than funds investing primarily in bonds. Stock prices are set by whatever developments are affecting market demand, from company earning projections to public opinion.

Sectoral Funds

Any investor would love to invest in scrip of a growing sector. The reason why investors cannot is that they are too expensive to buy. Besides, the layman investor does not have the skills or the tools to follow and choose the right scrip.

For instance, how would a new investor choose between a Satyam and an Infosys, objectively? Sectoral funds prove their point in such cases, since they specialised Mutual Funds investing in a group of companies in a particular industry or sector. Their returns are ignited by an upwards trend in that industry or sector.

Sectoral funds are ideal tools to invest in specific industries without risking exposure to one particular company. However one has to bear in mind that the performance of the fund can come only at higher risk than in a diversified fund.

To succeed, a Sectoral fund must meet certain criteria. The sector needs to be big enough, with enough stock and must have long term potential. An investment in a Sectoral fund can have an impact only when it is held on for a long term. Changing market sentiments may make them volatile in the short term.

The advantage that an investor gets is a focussed portfolio in a sector where he desires exposure. The flip side is that he loses the benefit of diversification, an inherent characteristic of any mutual fund. 

For instance. Kothari Pioneer Fund. India's first Infotech fund had grown by almost 30% since February now. But now the fund seems to be in the doldrums since the bullishness of the Infotech sector has lost steam - one of the perils of inadequate diversification. Nevertheless today, sectoral funds have become popular avenues of investment.

Click here to learn about Gilt funds or here to learn about Income Funds.

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