Factors to Consider Before Investing in Banking and PSU Funds
1. Diversification: Banking and PSU Funds are managed by fund managers, and every fund will have its own set of parameters and composition of different top-rated debt instruments containing securities that are issued by banks and public sector undertakings. So, the investor needs to study the individual composition that fits his investing parameter.
2. Time Horizon: If an investor has a short-term horizon, only then he/she should consider banking and PSU Funds, as they have proved to be beneficial in the long run, i.e. around a period of one to three years or more. If investors have long-term goals and are looking for a fund, banking, and PSU Funds might not be the right choice for them.
3. Tax Implications: Investors need to ascertain the tax implication of the fund, if he/she is ignorant about the tax implication, they might not get a fruitful return out of it.
4. Risks: Investors should consider his/her risk appetite before investing. Although banking and PSU Funds are less prone to risks, if the investor wants to minimise the risk, he/she should approach a fund that has lower dependence on equity.
5. Expense Ratio: Investors should precisely go through the investment terms and conditions, and should carefully understand the expense ratio, as a fund with a lower expense ratio is always better than a fund with a higher expense ratio.