'Diversify fund portfolio, avoid betting on sectors'

MUMBAI: Defensive sectors like pharma and FMCG are on investors' radar. Many have noticed that these sectors have been topping the return chart in the mutual fund industry for sometime. No wonder, they are contemplating investing in these sectoral schemes. However, investment advisors have a word of caution for them: don't start chasing short-term winners and instead always try to diversify your portfolio so that you would gain from upside in any sector.
"It is no wonder that investors have started noticing these sectors lately.But the trouble is that winners come into notice only after they have won already, there is no guaranty that these sectors are likely to offer similar returns in the coming months," says Amit Trivedi, a financial trainer. "The problem with investors is that they tend to chase winners in the last six months. Again, they would shift out and invest in another sector which would have started performing well for a few weeks. In this chase, they will lose out on a good opportunity to earn more returns," he adds.
Experts say it is almost impossible for anyone to get in and get out of winning sectors all the time.
"Investors should remember that different sectors would perform better at different points in time. For example, everyone was talking about gold sometime back. Then small and midcap stocks came and now it is pharma and FMCG. It won't be possible for an average investor to get in and out of sectors as and when they perform," says a mutual fund manager, who doesn't want to be quoted. "Look at the returns offered by either gold or small and midcap funds now. If anyone has gone overboard on these schemes, they would be regretting it now," he adds.
Rakesh Goyal, senior vice-president, Bonanza Portfolio, believes that this is not the best to time to be defensive.