What is sectoral mutual fund?
- Mutual funds have many sub categories within it. We will here introduce one special category of mutual funds which is Sectoral or Sector funds.
- As the name specifies these kind of funds are focused in specific sectors or themes.
- Sector funds are suitable for investors who have enough knowledge of mutual funds and market as well.
- Investor finds some specific sector has growth potential in near or medium term future then he invest in funds having portfolio of the same sector.
- For example IT funds only invest in IT companies and Consumer funds only invest in FMCG companies.
- Now a days Some mutual fund experts believe that the infrastructure schemes, IT, pharma and FMCG schemes may deliver good returns. So if investors invest in consumer funds , IT funds or pharma funds then he will get benefited by out performance of that sector .
- Usually sector specific funds associated with market cycles. Some sectors perform well during a cycle and others perform badly during the same cycle.
Why sector funds?
- Sector funds are aimed to get advantage of sectors which will perform well in future.
How to invest?
- Find sector in which you find growth in next 3-4 years.
- Invest before the sector perform well and exit when you find that sector is underperforming.
Who Can invest?
- Aggressive investors and who have enough knowledge about market and that sector.
- Its not suitable for long term investors as its cyclical funds.
- Investor has to be cautious after investing in these funds.
Risk Profile of sector funds
- Riskier than diversified equity mutual funds as it entirely invest in specific sector.
- Performance of the funds solely depends on performance of that particular sector only.
Top 5 performing Sector Funds