Mutual Funds Investment tips: What are theme-based and sector-based funds?  Where is it right to invest money?

Mutual Funds Investment tips: What are theme-based and sector-based funds? Where is it right to invest money?


Mutual Funds Investment Tips: Investment in Share Market and Mutual Funds has increased rapidly in the last few years. Investors in mutual funds want to get maximum returns and also reduce the risk. Sectoral or themed products are becoming more and more popular these days in the investment world as compared to a few years back. Sector-based and theme-based funds are one type of equity mutual fund available to investors. These are schemes that invest in a particular theme or sector. These schemes can either give very good returns or remain in loss for years. Let us first understand what they are.

What are these funds
In the case of sector funds, investments are made in stocks belonging to a particular industry or sector. Theme-based funds can invest in different sectors or industries, but such industries are often tied to a common theme.

sectoral fund
Sectoral funds mean funds that invest in such stocks which are part of a particular industry group or sector (like pharma, banking, infrastructure etc.). Sector-based equity funds try to take advantage of the growth in a particular industry. Sector-based market patterns are unique and investing in the right sector can yield returns that are much higher than the market returns.

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If the investor takes entry in the market at the right time, then investing in any sector can give high returns. Sector-based returns are generally cyclical. Sector-based is also considered risky as the risk is not diversified across sectors. One should invest in it according to the advice of experienced investors who have knowledge of entry and exit at the right time.

theme-based funds
Theme-based funds have a semi-diversified portfolio. These funds invest in several sectors which are linked to a common theme, such as housing, tourism, Make in India etc. Now Housing Thematic Fund invests in those companies which are part of Housing Theme. In this theme, cement company, paint company, housing finance company, steel company and all those companies which are part of housing theme will come. Even if this company is from different sectors. But his theme will be the same.

Thematic investment is a high risk and high reward investment
Housing Thematic Fund will analyze all the companies in this sector and will invest in the company which it likes. That is, they will invest some part of Housing Thematic Fund in cement company, some part in point company. This type of investment is risky i.e. if the theme of housing goes on then you will gain or else you will lose. Hence, thematic investment is a high risk and high reward investment.

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Theme-based mutual funds are known to give good returns over a long period of time. They identify the emerging trends in the market and make a strategy to invest in them. Hence, investors who have experience in spotting profitable trends can rely on theme-based funds for long-term investments.

High Risk, High Return Fund
Certified Financial Planner Birju Acharya explains that these are high risk, high return funds. Like we say for the equity market that it should be invested for at least 3 to 5 years, while thematic and sectoral funds should be invested for 5 to 7 years. Like pharma sector gave good returns in 2010 and 2020 and now real estate and auto sector is looking good. Acharya further explains that sectoral and thematic funds are the funds associated with the economy. No one knows which sector will perform well in future. Because every sector has a cycle.

Tags: Mutual fund, mutual fund investors, Mutual funds, Returns of mutual fund SIPs, Share market


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