COMMUNICATION MUTUAL FUNDS

Communication Mutual Funds are thematic mutual funds which predominantly focus on investing in the communication industry and quite often include internet related companies too. Investors who are specifically looking to gain exposure to this sector and willing to take up the required risk to take benefit from the booms in this industry can opt for these funds. 

In this article we will talk about different aspects of Communication Mutual Funds and gain a deeper understanding of the same. Let’s get started.

MERITS OF COMMUNICATION FUNDS

1. Focused:

Communication funds as any thematic fund is focused particularly on one sector. There does not exist so much diversification with respect to sectors. All sectors go through market volatilities and cycles and perform accordingly, and when a particular sector is booming, funds that focus on growth sectors give maximum returns and grow beyond the margin from the benchmark and other funds. This sector has given consistent returns over a long tenure now. 

2. High returns:

Communication funds have the main aim to outperform equity funds by staying invested in the communication sector as it is one of the prominent sectors in India. All sectoral funds have the prime aim to outdo diversified funds if fund corpus is invested in a specific sector which is expected to grow in recent years. If this agenda fails, the fund may suffer a heavy dent but may beat the market returns of other funds if that sector boosts up. Hence, there exists a high risk reward ratio. 

3. Investment pan market cap:

It is focused on one specific sector but not one capitalization. It invests predominantly in communication based shares but entities of all sizes varying from small and mid cap to large cap. It depends on different AMCs and schemes if they would invest a major chunk of the corpus in any one market cap or go forward with diversifying throughout. 

THINGS TO CONSIDER BEFORE INVESTING

1. Investment tenure:

It is required that investors have an investment horizon of at least 5 to 7 years or more to mitigate the associated risk to a maximum extent and reap the maximum returns out of it. 

2. Risk profile:

If investors are not willing to take risks then they should stay away from investing in these mutual funds as they carry high levels of risk which we are going to talk about next. They should be ready to assume a high level of risk while investing in these. 

3. Diversification:

Investors must take note that they do not get the advantage of exposure to a diversified portfolio by investing in these funds. The reason is that these funds invest in shares of entities that are driven by consumers. 

HOW TO PICK BEST COMMUNICATION FUNDS TO INVEST IN?

Some of the key aspects you must keep in mind while opting are as listed below:

1. Fund performance:

Go with a mutual fund that has performed consistently over the last 5 years. Also, that has consistently beaten the benchmark of 4-5 years can be an ideal choice. 

2. Fund managers and fund house:

Take a look at the reputation of the AMC/Fund House and the Fund managers who manage the funds. A fund should belong to a reputed and quality firm. Adding to it, a fund's performance is majorly in the hands of their managers. Therefore, investors one should check the past performance of the fund that is being managed by the fund manager also with experience. 

3. Size of the fund:

While picking a mutual fund, investors should always have a look at the size of the fund. There is no ideal definition and relation between the fund size, it is said that both too large and too small, can hinder the performance. Hence, while opting a fund, it is advised to go for the fund whose AUM is approx as the category. 

WHO SHOULD INVEST IN COMMUNICATION MUTUAL FUNDS?

Since these funds are equity thematic funds, they essentially carry some higher risks when compared to other mutual funds. Hence, Communication mutual funds are more ideal for investors who are willing to bear high risk in exchange for the potential of benchmark beating and above par returns when the sector is in boom.

These funds can prove ideal to investors who have a high risk appetite and seek to tap on the potential of the communication themed stocks and earn high returns in the long term. It is mandatory to have a long term horizon to mitigate the risks as we discussed. Investing in these funds gives exposure to a lot of potential and opportunities.

THE BOTTOM LINE

As on date in India, there are no such mutual funds specifically dedicated towards the communication theme. But in the near future, as the investors are becoming more educated and the market base is expanding, we can expect fund houses and AMCs to introduce interesting funds around this theme. For the time being, if investors are willing to take exposure to these stocks, they can go ahead with diversified equity or IT sector funds offering that kind of exposure.