In a recent report by ET, inflow into equity mutual funds in the month of June was Rs.40,608 crore. More than half of the inflow was from sectorial/thematic funds.
Let’s have a brief understanding of these funds.
Sectoral and thematic funds are equity-oriented mutual funds that primarily invest in equity and equity-related instruments of a pre-specified sector or theme. These funds focus on specific areas of the market, allowing investors to participate in targeted segments. Here’s what you need to know:
- Sectoral Funds:
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- These funds concentrate their investment portfolio on equities of companies within a particular sector. For example, a sectoral fund might focus exclusively on technology, healthcare, or banking stocks.
- Investors who have advanced knowledge of macro trends and prefer to take selective bets for potentially higher returns compared to other equity funds often consider sectoral funds.
- However, it’s essential to be aware that sectoral funds can be volatile, and there’s a possibility of moderate to high losses even when the overall market is performing well.
- Thematic Funds:
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- Thematic funds have an investment strategy based on a specific theme. They invest across multiple sectors, weaving together stocks that align with the chosen theme.
- Themes can vary widely, such as rural consumption, housing opportunities, export-oriented companies, and more.
- Thematic funds allow investors to participate in trends they believe will drive growth, but they also come with associated risks.
Remember that both sectoral and thematic funds require careful consideration and understanding of the underlying sectors or themes.
Your investment should be aligned to your goal and your risk tolerance while investing in specialized funds.