SBI launches PSU Bank Index Fund and ETF

SBI Mutual Fund has launched two new investment options: the SBI BSE PSU Bank Index Fund and the SBI BSE PSU Bank ETF. Both are designed to track the performance of the BSE PSU Bank Index and are now open for subscription, with the offer closing on March 20. Experts recommend caution when considering these funds. They advise treating them as tactical investments rather than core holdings due to the cyclical nature of the banking sector. The PSU banking industry has seen strong returns recently but could face volatility ahead. The SBI BSE PSU Bank Index Fund aims to replicate the BSE PSU Bank Index, while the ETF offers a similar strategy but is traded like a stock. Both funds are suitable for investors wanting exposure to India’s public sector banking growth. However, experts warn against investing in new fund offerings unless they offer something unique. They suggest established funds may be safer as they provide historical performance data, which can help in making investment decisions. The PSU banking sector has recently benefited from improved asset quality and profitability. Nevertheless, rising valuations could bring short-term volatility. Investors are encouraged to think carefully about their risk tolerance and investment timelines. Experts recommend limiting investments in sector-specific funds to 5-10% of an overall portfolio. It's also advised to consider diversified funds instead, which can provide more stable returns by spreading risk across various sectors. In summary, while PSU banks may have growth potential, investors should diversify their portfolios and be mindful of the cyclical risks involved. Always base your investment decisions on your personal financial situation and goals.