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    Is it the right time to invest in pharma funds?

    Synopsis

    If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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    Is it the right time to invest in the pharma sector fund?
    – Vijay Vara

    Pharma funds have been in focus ever since the Covid-19 pandemic caused a global lockdown. The increased consumption of medicines along with impending vaccinations have boosted the fortunes of many pharma companies and pharma sector funds. The pharma fund category has given very high returns during this period. Obviously, many investors have noticed high double-digit returns offered by pharma funds and they want to know whether these funds can be a good investment option. We always ask investors to avoid chasing returns. So, first take your eyes off those returns and ask whether you need a sector scheme like pharma in your mutual fund portfolio.

    As you may know, sector funds, including pharma funds, are not usually recommended to regular investors. Sector funds often go through a lot of ups and downs based on the economic environment. Since they have the mandate to invest around 80% of their assets in a particular sector even when it is down and out, these schemes may see a lot of volatility. This is the reason why many experts recommend sector schemes only to very rich or sophisticated investors as a diversification tool. A regular investor may find it difficult to get in and out of these schemes based on the fortunes of the sector. They would also find it difficult to deal with huge losses.

    A regular investor can let go of sectors funds, including pharma funds. Invest in a good diversified fund and chances are that it might have a meaningful exposure to a happening sector like pharma. A fund manager is always better placed to take a call on the futures of a sector. For example, pharma fund category has done well in the last one year. However, it was performing badly before that for more than two years. We can only guess what will happen to the category once the vaccine is out and Covid disappears. All these calls are better taken by a fund manager in a diversified fund. So, our advice to regular investor would be to stick to good diversified funds.

    (If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
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    2 Comments on this Story

    Sandesh Rane8 days ago
    It's still right time to board Pharma Fund with 5 years investment period
    Bijul Desai10 days ago
    Its bit late
    The Economic Times