In April 2016, Mint Money had told you about funds that should be there in every portfolio (read it here: http://bit.ly/1RzJ23U). These included liquid funds, diversified funds and equity-linked saving schemes (ELSS). These are some of the basic types of funds available. But there are also funds that you should think about many times before buying. They are not meant for everyone.
Sector, thematic funds
Sector funds, especially information technology linked ones, used to sell like hot cakes around 1999, on the back of the information technology (IT) boom. Schemes that tracked fast-moving consumer goods (FMCG) and pharmaceutical companies were also popular.
When the IT funds failed in 2000 and 2001, fund houses turned towards thematic funds. Between 2005 and 2007 more than 20 infrastructure funds were launched, which collected a total of about Rs.17,105 crore. But most of these haven’t performed well—10 out of a total of 17 have returned 8% or less in the past 8 years. Diversified equity funds have returned 18% in the same period.
“Investors need to understand the risk levels because thematic funds come with high risks, as they focus on just one or few sectors,” said A.K. Narayan, a Chennai-based distributor.
