In general, Sectoral Funds are avoidable for both short term and long term horizons. The reasons are lack of diversification, higher expense ratios and lack of flexibility.
- Long term: Not great because over 20 years (your horizon) the ups and downs of various sectors even out. A diversified and multi cap or large cap bouquet of funds would actually do better and less volatile. Sectoral funds suffer from sequence of returns which means that a bad initial run can significantly reduce your long term returns.
- Short term: Again not great because you may end up betting on the wrong sector.
Here is more on why sectoral funds may not be the best bet. When you are investing in mutual funds, the idea is to hire a professional manager at a low cost to manage your funds. Why take on additional headache of tracking each sector and switching in and out of funds!
