Financial Planning: Mutual fund advisors advise seasoned investors not to invest in sector or thematic funds due to their high risk and volatility, and recommend only a small percentage of the total portfolio. New commers do not fall for overnight success by investing in F&O (Futures and Options speculation) , day trading, IPO flipping, MML etc. They suggest that investors would benefit from sticking to diversified equity funds. They also suggest that investors should hold some cash for taking advantages of some good opportunities.
According to Rajeev Thakkar of PPFAS Mutual Fund, sectoral mutual funds have failed to live up to investor expectations because they tend to draw capital when the industry is booming rather than when there are lucrative prospects. Investors in sectoral funds in the US and India have not seen very good returns on their investments since these funds are launched and raise the majority of their capital when the industry is “hot,” and they do not attract investments when the chances are truly alluring. In his most recent letter to unitholders, Thakkar stated, “We have already seen that some of the more recent sectoral and thematic funds have NAVs that are lower than the offer price.
