Lesson 3.How to select more potential sector funds?

Hello；

After learning the "core + satellite" method of allocating funds, some of you may wonder, "If I am interested in the liquor industry, which liquor industry-themed fund I should choose?"

In this article, let me help you to find your answers in four dimensions.

1、Select industries that foreign investment is optimistic about

Firstly, "foreign investment".

Different from the "foreign investment" that everyone understands, foreign investment in the A-share market mainly refers to Hong Kong capital and international funds flowing to the A-share market through Shanghai Stock Connect and Shenzhen Stock Connect. Therefore, foreign investment is also called "smart money".

Therefore, the future potential of industries that can be optimistic about foreign investment must be pretty good.

Data source： Wind.

So, which industries are foreign investors optimistic about?

As of December 13, 2022, food, beverages, and tobacco occupied second place among the industries held by foreign investment. Among them, beverages account for 63%, and among beverages, liquor accounts for up to 96%.

From the above data, it can be seen that foreign capital can be said to be very partial to the liquor industry.

2、Select industry-themed funds with excess returns

Data source： Wind.

Whether an industry thematic fund is attractive or not, excess returns are critical indicators.

Comparing the annualized returns of the CSI Liquor Index and the CSI 300 Index in the past 10 years, it can be found that the 10-year annualized return of the CSI Baijiu Index is 3.7 times that of the CSI 300 Index, with obvious excess returns.

  3、Choose a fund with a cheap valuation

Data source： Wind.

There is also an important dimension in choosing industry funds, that is, to see whether the valuation of the industry is expensive, only when the industry has strong potential, and the valuation is relatively cheap. This is a good time to get involved.

4、Choose a fund with a strong investment management team involved

Data source： Galaxy Securities Fund Research Center

In addition to the industry itself, the fund's management team is also an important base selection dimension.

An excellent fund management team determines important factors such as fund management ability, management experience, investment research team, and customer service.

You can easily pick out an excellent fund by combining the above four dimensions.

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