The pursuit of good health is a universal endeavour that transcends borders, cultures, and generations. As medical advancements continue to redefine the possibilities of a healthier future, the importance of healthcare takes on a new dimension – not just as a pillar of personal vitality but also as a potential cornerstone of personal financial growth. If you are wondering how the significance of healthcare extends beyond its pivotal role in our lives and permeates into our investment portfolio, this article is for you. Find out about healthcare mutual funds and if you should invest in them.
Unveiling the basics of healthcare funds
Healthcare mutual funds are a type of sectoral funds that focus on companies within the healthcare sector. They can be categorised as sectoral equity funds or index funds. Like all other sectoral funds, healthcare funds invest at least 80% of their assets in stocks of the healthcare industry. These funds can include several sub-categories within the broader healthcare sector, such as pharmaceuticals, hospitals, diagnostics, etc.
Index funds invest at least 95% of their assets in securities of a particular index. Healthcare index funds primarily invest in the same stocks as the index they follow. For instance, a healthcare fund following the MSCI India Domestic & World Healthcare 45 Index will mimic at least 95% of its portfolio composition.
Find out some key aspects to consider when investing in healthcare funds.
Investing in healthcare funds
The healthcare sector, which encompasses pharmaceuticals, hospitals, diagnostics, medical equipment, and more, is experiencing rapid growth. This growth is driven by increasing demand for healthcare services and rising healthcare budgets post the COVID-19 pandemic. These developments indicate significant future potential.
While you can directly invest in the stocks of individual healthcare companies, uncertainties like regulatory approvals, legal matters, and drug approvals can pose risks. To manage these risks, healthcare mutual funds offer a solution. These funds allow you to invest in a curated portfolio of hand-picked stocks managed by professional fund managers. Healthcare mutual funds provide you with diversification that spreads risk across multiple stocks, providing a comparatively safer investment avenue than direct equity investment.
That said, being equity funds, healthcare mutual funds carry high risk and, therefore, should be considered for long-term financial goals like retirement planning or wealth accumulation. Equity funds are highly volatile, but they have the potential to ride out market fluctuations and perform over an extended period.
How to invest in healthcare funds?
You can invest in healthcare funds through a Systematic Investment Plan (SIP) or a lump sum. An SIP allows you to invest a fixed sum of money at regular intervals. Since you are investing smaller amounts regularly, you can start with a lower initial investment. SIPs help you buy more units when prices are low and fewer units when prices rise. This averages out the overall cost of your investments.
A lump sum investment involves putting a larger amount of money into the fund all at once. Lump sum investments typically require a higher upfront investment compared to SIPs.
Conclusion
Healthcare mutual funds offer a strategic gateway into a dynamic sector. With the potential for rapid growth due to increasing healthcare demands and budgets post the COVID-19 pandemic, these funds can provide exposure to diverse segments such as pharmaceuticals, hospitals, and diagnostics. However, they also contain risks. Therefore, it is advised to research well and maintain a long-term investment perspective when investing in them.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME RELATED DOCUMENTS CAREFULLY
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
