Highest risk in equity mutual funds is sector or thematic funds. By nature of the fund, it will not do well all the time and it will give all the returns some point of time after that it will be flat or down also compared to the diversified funds.
Entry & Exits are very important, many will tell you when to enter and hardly anyone will tell you when to exit.
Moreover, the extra return one can get is a maximum of 10% more. For example, if the diversified equity fund is generating 15%, a sectoral fund might generate 10% more.
Most of the investors will not keep more than 10% in sectoral funds. 100 *15%= 15%. 90 *15%=13.5% + 10*25%=2.5%. If you add it together, it is only 16%. To get 1% more, will that risk be needed?
Long-term banking & financial services, IT & consumption did well. Other sectors like pharma, FMCG, auto, and capital goods are not consistent.
Either you should play for a long time horizon or it should be more of a tactical call.
Banks & financial services funds
Padmanaban Balasubramanian is the Director of Fortune Investment Services Pvt Ltd.