MUMBAI Arvind Bansal, as a fund manager at ING Mutual Fund, does not research stocks unlike his colleagues. He studies various schemes of mutual funds to choose from. After 14 years at managing a fund of funds, he advises investors to keep away from sectoral funds that are hawked by fund houses as high return, but not told that it is a high-risk game too. "Investors should not take a sectoral call while investing in equity funds as concentrated risk is much higher in sectoral funds. And you can never say which companies will perform in a sector at what time. It's quite risky to have single-sector exposure," Bansal said.
In a bull market, any equity investment may provide a return, but when the tide turns, as it is now, it is safer to invest in a fund focused on a fund that invests in large-cap companies such as Bharti Airtel, Infosys and Larsen & Toubro, as they could weather the storm. On a three-year basis, the diversified funds category averaged 16% return compared with 13% for the S&P CNX Nifty, data from ICICI Direct shows. The benchmark Sensex has gained 2% this year against BSE's Midcap/Smallcap indices' (-7%) and (-11%) returns during the same period.
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