With so many similar investment opportunities available at one go, these funds are likely to attract one's attention. Then comes the question -- are these new funds worthwhile or even superior investments? How good are specialised/sector funds?

With my conventional investment wisdom, I have always warned investors to steer clear of new mutual funds and to stay with funds which have a proven track-record of three years or even longer. But an investor who has followed that advice, will be forced to ignore 66 of the 101 open-end funds which have been launched over the past three years - including 31that are less than a year old.

At the very least, their performance in recent years merits a further study. I took a closer look at the numbers to make a more-informed investment decision. The key finding is that the new equity funds have given higher returns than their older peers. This higher return, however, has been driven by greater risk-taking on the part of these new funds. In general, on a risk-adjusted return basis, these funds have not outperformed their older peers. Importantly, evaluating funds based on longer periods of performance is still a good idea.

On the attractiveness of a sector fund, these funds with their sharp focus should deliver superior returns and the sector outlook of the funds being offered is very bright over the medium to long-term time horizon. However, these funds lose out on the benefits of diversification. A sector fund contains stocks that react in a similar fashion, either up or down, to factors affecting the industry.

A sector fund will have to stick to the stocksof the specific industry irrespective of a pessimistic or optimistic forecast for the sector and build a portfolio that gives the best risk-return payoff within the constraints of sector investing. The sector funds on offer are ideally suited for investors seeking growth in a time horizon of three-to-five years through investment in shares of well managed funds with bright prospects.

However, investors should look at these funds as an add-on to enhance their overall return to an already diversified portfolio. These funds are not complete investment solutions. A smart investor in a new fund should do some homework first.