INFRASTRUCTURE MUTUAL FUNDS
Infrastructure funds are a kind of sectoral equity mutual funds that particularly cater to entities that are related to the infrastructure sector directly or indirectly. Being a sectoral fund, the risk on investment for these funds are relatively high but the returns are also high. With the increased focus of the government on infrastructure development across the country, this sector has offered a pile of opportunities to leverage the growth potential of the infrastructure sector in the nation.
In this article we will talk about different aspects of Infrastructure Mutual Funds and gain a deeper understanding of the same. Let’s get started.
THINGS TO CONSIDER BEFORE INVESTING
1. Investment tenure:
It is required that investors have an investment horizon of at least 5 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.
Investors must take note that they do not get the advantage of exposure to a diversified portfolio by investing in Infra mutual funds. The reason is that these funds invest in shares of entities that are driven by consumers.
RISKS ASSOCIATED WITH INFRASTRUCTURE FUNDS
1. Market Risk:
Market risks are the possibility of the value of the investments getting reduced due to the downward market movements.
2. Concentration Risk:
The risk of concentration associated with sectoral infra funds is on the high side as their portfolio is concentrated with infra companies securities. There is no doubt that investors can make amazing returns when the sector is booming. But losses can be magnified when performance is not as expected.
3. Volatility Risk:
Volatility risk is the possibility of the reduction in your worth of investment due to sudden change in the price of the shares.
HOW TO PICK BEST INFRA 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.
TOP 5 INFRASTRUCTURE FUNDS TO INVEST IN
|FUND NAME||5 YEAR RETURNS||MINIMUM INVESTMENT (One time/SIP)|
|SBI Infrastructure Fund||14.77%||Rs. 5000/500|
|Kotak Infra and Economic Reform Fund||14.14%||Rs. 5000/500|
|Canara Robeco Infra Fund||12.6%||Rs. 5000/500|
|Tata Infra Fund||13.63%||Rs. 5000/500|
|DSP India TIGER Fund||14.13%||Rs. 500/500|
WHO SHOULD INVEST?
- Investors having high risk appetite as the returns are solely dependent on the performance of a single sector which is Infrastructure.
- Investors having long term investment tenure (at least 5 to 6 years) as the equity securities are quite sensitive to market fluctuations in the short tenures.
- Before opting for investment in these funds, investors should do proper research and analysis of the future and current market situation and growth prospects of the companies in the funds and sector. The decision should be based on multiple factors related to the sector.