Recently, several brokerages have received inquiries about thematic mutual funds. In fact, with regard to thematic and sectoral mutual funds, net inflow clearly reflects a picture of growth in the sector. In 2021, such funds received inflow of above Rs. 25,000 crores. This represented an increase that was three times greater than inflow that was displayed in 2020, which amounted to Rs. 8,000 crores. The talk of the town around such mutual fund investments is that they give investors gains in a short span of time. The best thematic mutual funds in India are, thus, creating a lot of excitement, but unless you pay attention to certain intricacies in these investments, you may lose out.
The way that thematic and sectoral mutual funds work is that they offer investors a focused exposure to a particular theme, or sector. It's important to draw attention to the distinction between thematic and sectoral mutual funds. The first and most basic question you must ask yourself is “What are thematic and sectoral mutual funds in India?”You may well wish to invest in the best thematic mutual funds in India, but you have to understand what they are before you ask any more questions or plunge in to invest. Sectoral mutual funds primarily invest in those companies that pertain to specific sectors. For instance, mutual funds of stocks in such companies as belonging to the auto sector, pharmaceutical sector, banking sector, constitute sectoral mutual funds. On the other hand, thematic funds concentrate on companies that fall within a distinct theme. These are broadly based and can be spread over sectors. For example, infrastructure, consumption, manufacturing, etc, are themes and many diverse companies could belong to each theme.
Thematic mutual funds and sectoral mutual funds both have targeted portfolios that they may be associated with. Because themes and sectors are close-knit, there isn't much room for diversification. Consequently, such funds would afford a higher risk-return ratio. Here are 6 more questions to ask yourself before you invest in such funds, making it total of 7 with the previous one answered:
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