While it may sound novel to many investors, a business cycle fund has been around for a few years now. Through this scheme of funds, you can create wealth in the long-term as it predominantly invests in equity and equity-related instruments.
Have these relatively new funds been successful? For the most part, yes! In fact, year-on-year trends clearly show that these funds outperformed broader indices, especially when put to test when the market was especially volatile.
What are Business Cycle Funds?
Decoding this type of mutual fund is not that challenging if you know what instruments it bets on. While creating business cycle funds, fund managers identify certain sectors expected to see positive growth or a quick turnaround within their business cycle and invest in them.
Typically, stocks of industries like oil, gas, metal, and such form a robust base for business cycle funds. These funds take a top-down approach, wherein the fund manager first looks at a particular sector or theme, evaluates it growth, and invests in it.
Such an approach is novel because most Indian investors follow a bottom-up approach, meaning they pick stocks of sectors that have completed an entire business cycle and are hopefully doing well. However, investing in business cycle mutual funds comes with its own share of benefits. Let’s ponder upon them in the next section.
Additional Read: Is it Advisable to Switch Mutual Funds for Better Results?
Who Should Invest in Business Cycle Funds?
One thing is for certain that these funds require a substantial amount of foresight on the fund manager’s part, as they are betting on sectors expected to do well. But, mostly experienced fund managers who have spent a significant amount of time within the mutual fund economy ready these funds for investment.
Moreover, even though these funds are new to the market, they promise exceptional returns, provided the sector completes a successful business cycle. Therefore, it is best suited for investors who can stomach moderate to high risks and have a relatively long investment horizon to enjoy substantial returns.
Business cycle funds are also a great addition to your financial portfolio if you wish to diversify it. Filling up your mutual fund kitty with only debt-linked funds might greatly mitigate risk but will provide low to moderate returns.
Supplement these with equity-linked mutual funds like business cycle funds to bump your returns capacity. With both types of mutual funds adorning your financial portfolio, your chances of growing your wealth go up tenfold.
Additional Read: How to Manage Your Mutual Funds Smartly/Wisely
The bottom line
If you’re wondering how to begin your investment journey in business cycle funds, Tata Capital Moneyfy is an excellent place to start. We launched the Tata Business Cycle Fund not too long ago. This thematic/sectoral open-ended equity product invests in businesses that are expected to grow.
To know more or invest in this type of mutual fund, visit our website, and create your account. You can also select from an assortment of different types of debt and equity mutual funds to further expand your mutual fund portfolio through Moneyfy app.
If you wish to invest in mutual funds indirectly, start a monthly SIP with us for as low as Rs. 500. So, why wait? Log on to Tata Capital Moneyfy and manage your wealth the best way you can.