I want to drive home one single point here. It is that investing in sector and thematic funds is as much about psychology as it is about timing. All such funds lure investors with a story. Why? It's because the narratives are an intrinsic part of the human existence, and asset management companies (AMCs) are extremely well aware of this.
French philosopher Jean-Paul Sartre so profoundly said: "Man is always a teller of tales, he lives surrounded by his stories and the stories of others, he sees everything that happens to him through them."
Our approach to investing is not different. That is why we succumb rapidly to the next best story. And, if we are not careful, it will drive us to invest in every single new fund offering (NFO) that promises the silver bullet to build wealth quickly. The lure of the storyline has a large influence on our decisions.
Having said that, there is a lot of money to be made if you understand the dynamics.
Entry Point Matters
In diversified equity funds, it is recommended that one invests periodically and consistently. A systematic investment plan (SIP) does that. You can invest a fixed amount at a predetermined time (daily, weekly, monthly, quarterly, semi-annually or even yearly), irrespective of the state of the market. Psychologically, this is not taxing, as the investments are automated. And you do not time the market.
When it comes to investing thematically, the most money is made when you go against the tide. You need to take a contrarian view, which is not easy.
This story is from the October 2024 edition of Outlook Money.
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This story is from the October 2024 edition of Outlook Money.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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