{"id":384917,"date":"2024-07-25T18:11:21","date_gmt":"2024-07-25T12:41:21","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=384917"},"modified":"2024-07-25T19:15:16","modified_gmt":"2024-07-25T13:45:16","slug":"sectoral-bets-the-wait-for-returns-can-be-longer","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/varsity\/sectoral-bets-the-wait-for-returns-can-be-longer","title":{"rendered":"Sectoral bets: The wait for returns can be longer.."},"content":{"rendered":"\n\n\n

Whenever a particular sector performs well, inflows into sectoral or thematic mutual funds surge dramatically, indicating investors chase returns. However, these sectors can underperform for extended periods, making timing crucial; for most investors, diversified mutual funds are a better option.<\/p>\n

The following charts show the sporadic returns from sectoral indices and highlight how some sectors have underperformed for longer periods.<\/p>\n\n\n\n

    \n
  1. The 10-year return in various sectors vs the Nifty 500 has been pretty close. However, the performance in the former came with a lot of volatility expressed by the standard deviation. <\/strong><\/li>\n<\/ol>\n\n\n\n
    \n
    \"\"<\/a><\/figure>\n<\/figure>\n\n\n\n

    2. Sectors go through cycles, and they can take very long periods to deliver returns. Timing the entry and exit is quite important when taking bets on individual sectors. <\/strong><\/p>\n\n\n\n

    <\/p>\n\n\n\n

    \n
    \"\"<\/a><\/figure>\n<\/figure>\n\n\n\n
    \n
    \"\"<\/a><\/figure>\n<\/figure>\n\n\n\n

    3. Here are the key points to note when investing in sectoral funds, as suggested by Vishal Dhawan, a Sebi-registered investment advisor<\/strong><\/p>\n\n\n\n

    a. Sectoral\/thematic funds clearly go through cycles<\/strong><\/p>\n\n\n\n

    b. Some sectors may have a longer downside period<\/strong> than others<\/p>\n\n\n\n

    c. Underperformance c<\/strong>an continue for a long period of time<\/p>\n\n\n\n

    d. Enter sector\/thematic funds, either because you can time your entry and exit right<\/strong> or with a very long-term investment horizon<\/p>\n\n\n\n

    e. Limit portfolio exposure to 5% to 10%.<\/strong><\/p>\n\n\n\n

    f. Broad-based index (Nifty 500) has a decent ride compared to others.<\/p>\n\n\n\n

      \n
    1. <\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

      Whenever a particular sector performs well, inflows into sectoral or thematic mutual funds surge dramatically, indicating investors chase returns. However, these sectors can underperform for extended periods, making timing crucial; for most investors, diversified mutual funds are a better option. The following charts show the sporadic returns from sectoral indices and highlight how some sectors […]<\/p>\n","protected":false},"author":242540,"featured_media":378635,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[477],"tags":[979,977,919,980,978,975,976],"class_list":["post-384917","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-varsity","tag-infrastructure","tag-mfs","tag-mutual-funds-2","tag-realty","tag-sector-bets","tag-sectoral-funds","tag-thematic-funds"],"yoast_head":"\nSectoral bets: The wait for returns can be longer.. – Z-Connect by Zerodha<\/title>\n<meta name=\"description\" content=\"Whenever a particular sector performs well, 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