I have a well diversified portfolio and now wish to invest in sector funds. Please advice on how to select a good sector fund.

Vijay Nambirajan, Chennai

Unlike diversified equity funds, where it is the fund manager who takes the calls regarding when to enter or exit a particular theme or sector, based on his outlook; when investing in a sector fund, this job is left to you because when you invest in a sector or thematic fund, you are trying to ride market cycles. These funds are essentially for investors who have a high risk appetite and are for seasoned investors who have a diversified portfolio and are willing to allocate a small portion to these funds in order to augment their returns. You should be aware of the risks posed when investing in these funds. If you have a well diversified portfolio, you should assess the sector allocation that you current portfolio of investments offer before evaluating a sector which lacks in representation and which you think is necessary to your overall investments. You can than look for an appropriate and performing sector fund to invest.

olmdesk@outlookindia.com