Priyanka Tiwari
Share
Suspense crime, Digital Desk : Investors are increasingly turning their attention to the healthcare sector, and for good reason. Pharma and healthcare-focused mutual funds in India have delivered impressive average returns of nearly 16% over the past year, fueled by a growing "wellness theme" that has captured the market's imagination. But while the performance is attractive, investors need to understand the risks before jumping in.
The pharmaceutical and healthcare sectors have seen a significant boost in investor confidence, largely driven by long-term growth factors. An aging population, rising health consciousness post-pandemic, and increased spending on medical care and wellness products are creating a robust environment for companies in this space. This sustained interest has translated into strong performance for mutual funds dedicated to the sector, with the category averaging a 15.8% return in the last 12 months.
However, financial experts caution that these are not your average mutual funds. Pharma and healthcare funds are "thematic" or "sectoral" funds, meaning they concentrate all their investments in a single industry. This lack of diversification makes them inherently riskier than broad-market funds. If the healthcare sector faces a downturn due to policy changes, regulatory hurdles, or a shift in market sentiment, these funds can experience significant losses.
Should You Invest?
The decision to invest in a pharma and healthcare fund depends on your personal financial goals and risk tolerance.
High-Risk Appetite: These funds are best suited for aggressive investors who are comfortable with high volatility and the potential for sharp fluctuations.
Long-Term Horizon: Sectoral funds are not for short-term gains. Investors should be prepared to stay invested for at least five to seven years to ride out market cycles and capitalize on the sector's long-term growth potential.
Portfolio Diversification: Experts strongly advise that these funds should only form a small part of a well-diversified portfolio, typically no more than 5-10% of your total equity allocation. They should be used as a satellite holding to supplement a core portfolio of diversified funds.
In conclusion, while the allure of 16% returns is strong, investing in pharma and healthcare funds requires a strategic and cautious approach. They offer a great way to bet on the future of wellness, but only as a calculated risk within a balanced investment plan.
Read More: Integrated Industries Multibagger Stock Turns One Lakh Rupees into Six Crores in Five Years
