The pharma sector is considered defensive. However, in recent times, it has not been behaving as one. Do you think it still make sense to invest in the sector?
Defensive sectors are ones that are likely to show consistent and predictable growth, both in good and bad times. There is a catch, though: They are not expected to show spectacular growth. However, in case of the pharma sector, the performance has been a spectacular one over the last three-four quarters and hence it has out-performed vis-à-vis the broader markets. Some key factors that have contributed to the growth of pharma companies have been the launch of key products in the US, increase in lifestyle-related diseases and increasing penetration of health insurance. Going forward, the sector is expected to show double-digit growth. As a result, it can be considered for investment. However, considering the risks associated with any sector investment, it would be advisable to have limited exposure to this sector too. A pharma fund can be a good way to begin as one can benefit from diversification as well overall growth of the sector.
I have been investing in equity funds over the last one year or so. The recent volatility in the stock market is making me nervous, even though I am a long-term investor. I want to know whether I should continue my investment or redeem my holdings to protect my gains?
As a long-term investor, you are likely to face these situations from time to time. You will do well to remember that volatility in the stock market is a natural phenomenon and the best way to deal with it is to keep focus on long-term investment objectives and avoid reacting to short-term movements. Those who react to such movements in panic often end up taking decisions that adversely affect their chances of achieving long-term success. Equity, as an asset class, requires time commitment and therefore, you should continue investing in a disciplined manner. Though reviewing a portfolio on an on-going basis is important to achieve good results, reacting to short-term market movements every now and then may not be a smart thing to do.
The writer is CEO of Wiseinvest Advisors. The views expressed by the counsellor are his own. Send your queries at yourmoney@bsmail.in
