In this article, we will be discussing Business Cycle Funds which is a developing theme in the Mutual Fund Industry. So, let’s understand this category of the fund in detail and will look at whether one should invest or not.
Business Cycle Funds:
- They are those funds that track particular businesses’ cycles.
- This cycle differs based on companies, sectors, nations as well as global level.
- Generally, the business cycle can be categorized into 3 types: Economy Cycle, Sector Cycle, and Business/Company Cycle.
- The first one is the economy’s cycle where a particular nation or economy goes through several ups and down. For Ex. the Indian Economy witnessed a downturn during 2008-2014, then the economy performed well post-2014 which again got suffered during 2017 and thereon.
- Under the economy’s cycle, there are several business cycles of sectors. Some sectors’ business cycles are easily trackable and some are not.
- The last type is a business cycle which differs from firm to firm. A company may perform better during some period and might also get affected at some period as well.
- This business cycle fund identifies these cycles (Economy, Sector, and Business) before the event and then takes advantage of the same.
Available Business Cycle Funds:
- Currently, there are 5 Business Cycle Funds which are available in the market, they are:
What Should Investors Do?
Returns of the business cycle funds might not be sustainable as the business cycle turns very rapidly. The fund manager of these funds should be highly experienced wherein the generation of returns remains to be quite challenging. Any wrong selection might result in a bad impact on the returns of the fund. Hence, an investor planning to invest in the business cycle funds should be highly cautious and should take investment decisions based on his/her due diligence.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.