Defence funds: Enter via SIP with 10-year view to manage valuation risk
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar said higher defence spending could lift revenue and profit for sector companies and add diversification, but cautioned that these funds could fall if spending slows or valuations correct, and that conservative investors should avoid them.
What Abhishek Kumar said
Why might defence sector funds interest investors?
If India's defence spending goes up, companies in the sector would likely earn more revenue and profit. Investing in these funds can also help investors diversify beyond the traditional sectors that usually make up their portfolios, which is the second reason I see for some investors to look at them.
What are the risks of defence funds, and who should avoid them?
If defence spending slows, these funds could be hurt, and today's elevated valuations are a risk in themselves. That is why I would advise conservative or inexperienced investors, anyone looking for stable returns and those with short-term goals to stay away from defence funds altogether.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on mutual funds
The article examines the sharp rally in defence-sector mutual funds and the case for and against investing. It covers the sector's growth drivers, a concentrated index, stretched valuations and slow order execution, and suggests only patient, high-risk investors enter, gradually and with a small satellite allocation.
Publisher source
Defence funds: Enter via SIP with 10-year view to manage valuation risk