Friday 10 May 2024


HDFC has come out with an  NFO namely HDFC MANUFACTURING FUND. 

Getting many calls on whether to invest or not. 

Here's my take : 

Investors should exercise caution before investing heavily in Manufacturing Funds, which offer exposure to a potentially profitable sector. This is because it is a Thematic fund, and its performance can vary significantly. The HDFC Manufacturing Fund is new fund and thus has no track record, which makes it a less prudent choice for conservative and first-time investors.

Instead, consider allocating a portion of your diversified portfolio to a reputable Multi-Cap or Flexi Cap fund. These funds offer a more diversified approach, investing in companies of all sizes and sectors. This diversification helps in mitigating risks and enhancing the probability of long-term gains.

🤔 "What should you do?"

Do not look at the immediate past returns & invest in a Sector or a Thematic Mutual Fund. Past performance is not an indicator of future returns, and this is especially relevant for sector and thematic investing 

Consider the following examples:

(a) If in 2016 you invested in Pharma looking at the 2015 performance, you would have been disappointed in 2016 & 2017

(b) Similarly, had you invested in IT in 2014 looking at the 2013 performance, the sector did do anything great for the next 4 years

(c) Look at investing in Metals in 2018 looking at the 16 & 17 performance, 18 & 19 would have disappointed you.

In sector investing, be a value investor & not a growth investor.
Some sectors always do better than others, but investors should not base their investment strategy on these tactical calls. 

The standard advice to investors remains the same: Stick to your plan, choosing schemes aligned with your goals and risk tolerance.

Thematic funds come with their own risk
A timely entry in – and exit from – thematic funds is important. That’s why retail investors are better off with diversified Funds
Thematic funds should not be your first investments, only risk takers as well as those who understand these sectors well enough, should invest in them.

**Benefits of Multi-Cap and Flexi Cap Funds:**

* **Diversification:** Multi-Cap and Flexi Cap funds invest across a wide range of sectors and companies, reducing the impact of any one sector or company on the fund's performance.
* **Growth Potential:** These funds have the potential to capture growth opportunities across the entire market, as they are not limited to specific sectors or company sizes.
* **Flexibility:** Flexi Cap funds have the added flexibility to adjust their asset allocation based on market conditions, potentially enhancing returns.
* **Proven Track Records:** Many Multi-Cap and Flexi Cap funds have proven track records of performance, providing investors with confidence in their ability to deliver consistent returns.

By investing in a reputable Multi-Cap or Flexi Cap fund with a strong track record, investors can increase their chances of achieving their financial goals while reducing the risks associated with investing in new funds with no track record.


Given the lack of track record of the HDFC Manufacturing Fund's future performance and the potential risk attached to Sector and Thematic funds, investors are definitely better off considering Multi-Cap or Flexi Cap funds. These funds offer a more diversified and proven approach to investing, increasing the likelihood of meeting your Financial Goals with reduced risks. 

Regards & wishing you Super Financial Success
Srikanth Matrubai
Author: Don’t Retire Rich
Qualified Personal Finance Professional
AMFI Registered Mutual Fund Distributor

Note: This article is for informational purposes only and does not constitute financial advice. Please consult a qualified financial advisor before making any investment decisions.

All the best,
Srikanth Matrubai
Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH

You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

Do read the book and give your valuable feedback and request you to post positive comments on Amazon. 

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