Mon, December 2, 2024

Business cycle funds: Ideal for seasoned investors with macro-driven goals

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Business cycle funds aim to optimise returns by aligning their portfolios with different phases of the economic cycle
The article from Business Standard discusses the risks associated with investing in business cycle funds, which are categorized under thematic funds. These funds aim to capitalize on different phases of the economic cycle by investing in sectors that are expected to perform well during those phases. However, the article highlights that these funds can be particularly susceptible to timing risk. Timing risk refers to the challenge of accurately predicting when to enter or exit the market or specific sectors, which is inherently difficult due to the unpredictable nature of economic cycles. The piece explains that while these funds might offer high returns when the timing is right, the potential for significant losses is also high if the economic cycle shifts unexpectedly or if the fund manager's predictions are off. It also notes that these funds require active management and a deep understanding of economic indicators, making them less suitable for investors who prefer a more passive investment strategy or those who cannot afford to take on high risk.

Read the Full Business Standard Article at:
[ https://www.business-standard.com/finance/personal-finance/business-cycle-funds-top-down-funds-that-can-fall-prey-to-timing-risk-124120200993_1.html ]