Pros & cons of investing in sector-specific ETFs

Exchange-Traded Funds, popularly known as ETFs, have always caught the fancy of investors. These funds pool the resources of several investors to buy assets and securities. A sectoral ETF tracks a basket of representative stocks specific to an industry sector rather than the broad market.

The Money9 Helpline hosted Finsafe’s founder Mrin Agarwal to resolve queries related to sector-specific ETFs.

Edited excerpts

Ashish Darji: I think sectoral ETFs are for some advanced investors who can time entry and exit basis of technical analysis or F&O. Please review my opinion. Also, I believe that one can make extraordinary returns with such ETFs if they have the knowledge and invest in ETF with proper liquidity.

Agarwal: I completely agree, in fact, sectoral funds are meant for advanced investors. They are meant as a tactical bench. So right now if you feel the sector is doing well and you can time your exit then you can enter into these funds.

Moni Patel, Gurugram: I am keen to explore ETFs and BeES. Could you suggest some good ETFs or BeES for all-weather investing to fairly new investors.

Agarwal: Since you are new to investing you should go for the Nifty 50 ETF. You can choose any of the fund houses. You should check the expense ratio and tracking error. All this information is available online.