Sir,
I am investing in two sectorial funds to have reasonable down payment for buying a flat after 12 years. I am investing 4000 rs each in these funds.
1. Canara robeco infrastructure fund
2. ICICI Pharma healthcare and diagnostic fund.
Should I continue with these funds for making a corpus of 30 lakhs in 12 years.
Ans: Assessing Sectoral Funds for Down Payment Goal
As a Certified Financial Planner, I understand the importance of selecting appropriate investment avenues to achieve your financial goals. Let's evaluate your current investments in sectoral funds and assess their suitability for your down payment goal.
I appreciate your proactive approach to financial planning, focusing on specific goals such as a down payment for buying a flat. Goal-centric investing is key to achieving financial milestones effectively.
Analyzing Sectoral Funds
Canara Robeco Infrastructure Fund:
Invests in companies within the infrastructure sector, which includes sectors like construction, engineering, and utilities.
Subject to risks associated with the infrastructure sector, such as regulatory changes, economic cycles, and policy shifts.
ICICI Pharma Healthcare and Diagnostic Fund:
Focuses on companies within the pharmaceutical, healthcare, and diagnostic sectors.
Susceptible to regulatory changes, patent expirations, and market dynamics within the healthcare industry.
Put all your eggs in one basket? Sectoral funds gamble on a single industry, exposing you to big swings if that sector stumbles. Unlike diversified funds, they lack balance, meaning a downturn in your chosen sector could drag your entire investment down. For a smoother ride, consider spreading your bets across a wider range of industries thru diversified equity funds.
Evaluating Suitability for Down Payment Goal
Pros of Sectoral Funds:
High Growth Potential: Sectoral funds can offer high growth potential during periods of sector-specific outperformance.
Focused Exposure: Provides concentrated exposure to specific sectors, allowing for potential gains if the selected sectors perform well.
Cons of Sectoral Funds:
High Risk: Sectoral funds are inherently riskier due to their concentrated exposure, making them prone to volatility and sector-specific risks.
Lack of Diversification: Limited diversification compared to diversified equity funds, increasing vulnerability to sector downturns.
Considering Alternative Investment Strategies
Diversified Equity Funds:
Offer broader exposure to various sectors and industries, providing better risk management and diversification benefits.
Suitable for long-term wealth accumulation goals with lower volatility compared to sectoral funds.
Conclusion and Recommendation
Given the risks associated with sectoral funds and the importance of capital preservation for your down payment goal, I recommend considering alternative investment strategies such as diversified equity funds. Diversified equity funds offer broader exposure and better risk management, aligning with your goal of accumulating a down payment corpus over 12 years.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in