some funds run the risk of eroding ur capital!!

Sector funds

Sector funds or sector-specific funds have a mandate to invest in just one sector like FMCG, technology/software, pharma etc. single sector funds are extremely difficult to manage once the rally in that sector fizzles out.

They may get caught wrong footed when the market rally runs out of steam. Their NAV at one stage may drop to such a bottom-rock price where from it shows no sign of recovery even to it’s earlier issue price! Remember K Tech's NAV?

One of the reasons why sector funds get promoted among investors is the lure of high return and the second is hefty commission mutual fund agents are promised with for meeting their sector fund targets.

Avoid sector funds, unless you have a view on the sector and know exactly when to invest in it and exit from it. Sector funds are high risk investment avenues and over the long term (3-5 years) they rarely outperform well-managed diversified equity funds.