Should You Invest in Healthcare and Pharma Funds? (2022)

Are you considering investing in the stock market? Do you have any thoughts about healthcare and pharmaceutical funds? Then this blog is just for you. Yes, healthcare and pharmaceutical funds are doing exceptionally well these days. Perhaps now is a good time to invest as well. For the first time in history, Healthcare and Pharma Funds are being discussed as if they are the real deal. However, the image is not as white as it appears. Risks in the market are always present. With proper research and knowledge though, you can absolutely be a master in the Investing game in this field.

In this blog, after we try to understand what Healthcare and Pharma Funds are, we will undergo a comprehensive investigation into “Why we should invest in Healthcare and Pharmaceutical funds?”

 What are Healthcare Funds?

Healthcare Funds invest 80% of their assets in Pharmaceuticals, Healthcare, and related industries. A healthcare fund’s goal is to keep a highly concentrated portfolio in the industry. It also has the ability to invest in a variety of market capitalizations and styles of healthcare investment opportunities.

 What are Pharma Funds?

 Pharma funds are sectoral equity funds that invest primarily in pharmaceutical and pharmaceutical-related companies. These funds aim to generate long-term wealth for investors by capitalizing on the pharmaceutical industry’s expansion. Biocon Stocks, for example.

 Now, we have an idea of what healthcare and pharma funds are all about. Let’s come back to the question –

 Should we invest in Healthcare and Pharma Funds?

In just a few years, the Pharmaceutical and Healthcare industries have richly rewarded their investors. Not only has the COVID 19 Pandemic changed our lives, but it has also changed the market. Healthcare and Pharmaceutical funds are experiencing a surge in popularity. The demand created by COVID 19 is the reason for this. This sector is yielding high returns as a result of the high demand. Some of the stocks have recently doubled in value. Many of them are thriving in the marketplace.  Let’s start with the benefits of investing in Healthcare and Pharmaceutical funds and later discuss the risks that come along with it. As the government recognizes the urgent need to expand healthcare facilities, investment opportunities in Healthcare Infrastructure (hospitals, medical devices) may prove to be a long-term champion. It wouldn’t be surprising if funding for this sector increased significantly. 

 Factors to Consider Before Investing in Pharma Mutual Funds in 2022

1.     Deciding About Investing in Pharma Funds

According to the SEBI mandate, pharma funds must invest at least 80% of their total assets in the specified sector. Only if you are an aggressive investor with a high-risk tolerance should you consider investing in pharma funds. 

2.     Having Adequate Knowledge is Important

If you have a complete understanding of pharmaceutical companies, you should consider investing in pharma funds. Investing in pharma funds may imply attempting to take a risky gamble in one industry.

3.     Investment Term

Only invest in pharma funds if you intend to hold them for the long term.

4.     SIP Plans

A systematic investment plan, or SIP, could be used to invest in pharma funds. It allows you to invest in the pharmaceutical fund over time 

5.     Investment Portfolio

Invest in pharma funds only if your overall equity portfolio lacks adequate healthcare exposure. A large-cap-oriented portfolio, on the other hand, has a pharma sector allocation of around 3% – 5%. Mid-cap and multi-cap funds may be more exposed to the pharmaceutical and healthcare sectors.

 Why You Can Consider Investing in Healthcare and Pharma Funds

1.     Demand

In India, the Healthcare and Pharma Sector has always been in short supply. Historically, demand has always outweighed supply. This is a rapidly expanding industry in the United States. As a result, investment in this fund will provide long-term benefits.

2.     Effects of The Pandemic

The COVID 19 Pandemic has put the icing on the cake in this industry by generating massive demand in the Healthcare and Pharmaceutical Industries

3.     Global Demand in The Long Run

The demand is not limited to a single country, but rather to the entire world. Drugs and hospitals are among the new items in high demand. Investing in any of these sectors that have performed well in the past can be profitable in the long run as well. 

 The market has two kinds of investors:

 1. Short-term investors – Those who profit from the ups and downs of stocks on a daily basis.

2. Long-term investors – Those who put money into stocks and wait for them to rise in value.

 Short-Term Investors

Looking at the Pharma & Healthcare Fund category from a risk analyzing point of view, investors with a conservative risk tolerance should avoid these funds. For a conservative investor, the funds’ risk exposure and resulting currency fluctuations can be overwhelming. As a result, conservative investors would be better off investing in wide-ranging- ranging equity funds rather than sector-specific funds such as Pharma, especially if your goals are of being a short-term investor and gaining yields from this sector.

 Long Term Investors

The rationale for investing in the Healthcare & Pharma Funds goes further than just risk appetite for investors with an assertive risk profile. To generate good returns with any market regional fund, the duration of inflow and outflow is critical. Simply put, none of us can time the market or predict its fate perfectly. If the sole purpose of investing in these funds is to yield significantly higher returns in the short term, you may be taking the wrong approach.

 Here Are Some Stats that Prove the Point:

According to the Bureau of Labor Statistics (BLS) in the United States, the pharmaceutical industry is currently the fastest-growing industry. From 2018 to 2028, the BLS anticipates a 14 percent increase. This is true not only in the United States of America but due to the COVID pandemic, all of the world’s economies, including India, are seeing an increase in healthcare and pharmaceutical funds even after the pandemic. Sectoral pharma funds have delivered an average return of 75% over the last year and a half, according to the website, ‘ETMoney.’ The returns over the last three and five years have been 23.14 percent and 13.7 percent, respectively. Some pharmaceutical stocks have more than doubled. In 2021, the Indian pharmaceutical industry rose by 17.7% annually. Some of the Pharma Stocks have doubled. In 2022 its market revenue is expected to be above 12%. The industry has achieved a CAGR of approximately 13% over the last two decades.

 List Of Healthcare and Pharma Funds That Are Doing Extremely Good-

·   Nippon India Pharma Fund Direct-Growth

·       Tata India Pharma & Healthcare Fund Direct-Growth

·       Aditya Birla Sun Life Pharma & Healthcare Fund Regular Growth

·       ITI Pharma & Healthcare Fund Direct-Growth

·   ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D.) Fund Direct-Growth

Things to Know Before you Start Investing:

 ● The Stock Market is full of risk. 

● This market not only runs on facts of company data but sentiments also. 

● Investment in any company without proper research can be risky. 

 Before investing in any sector or any company, one should do adequate research about that company and stock.

 Let’s understand it by an example; Biocon Stock

● Do adequate research by checking their website 

● Check what news is coming about that particular stock. Google about the stock Biocon

● Check their Financial Year Report 

● Know what experts are Saying 

 Let’s Sum Up

 The COVID 19 Pandemic has made investing in Healthcare and Pharma Funds profitable. Healthcare and pharmaceutical funds have recently doubled in value. Despite the fact that there is no doubt about the profitability of this sector in the stock market. However, as previously stated, this market is also risky. Blind investment in any company can be risky. A well-thought-out investment can increase your wealth.

The market is primarily driven by two factors. The first is facts, which means research – conduct thorough research before investing in any company – and the second is market sentiments, which means checking for any news or recent updates.

Although investing in Healthcare and Pharma Funds in India has never been a bad decision, the COVID Pandemic serves as icing on the cake by making it even more appealing to investors. The COVID 19 situation has resulted in high demand for this.