Focused funds: Weigh your risk appetite properly before investing

Focused funds, which according to Sebi guidelines can take exposure to at most 30 stocks in their portfolios, have performed well over the past year. They have given an average return of 11.27 per cent. The best-performing fund has yielded 27.04 per cent. These funds have done well due to the polarised nature of the equity markets. The large-cap category has done well. Within large caps, select stocks have driven the rally. Those fund managers in the focused category who were able to latch on to these stocks at the right time and take concentrated bets on them have outperformed. Weigh your risk appetite before entering them. When markets correct, they can take a bigger beating than diversified funds.