Amidst the turmoil in the stock market, retail investors are heavily investing in sectoral and thematic funds. According to the data released by the Association of Mutual Funds, Rs 3843 crore has been invested by investors in sectoral and thematic funds in the month of April, which is the highest among all nine types of equity mutual schemes. At the same time, investment of about Rs 15,887 crore was also seen in passive fund schemes, while investment of about Rs 15,890 crore has been seen in all equity mutual fund schemes.
What is a Sectoral Fund Fund?: Sectoral Fund is considered as a high risk category fund which invests in only one sector in the stock market. invest in. Only one sector is best for the sector, due to which if that sector does well, it gives more than the market return to the investors.
On the other hand, if the sector in which the fund is invested does not perform well, then investors may also suffer losses. For this reason, investors should also check and test the risk involved before investing anywhere. Historically, sectoral funds have often given good returns in the short term while they have given below average returns in the long term.
Harshad Chetanwala, co-founder, mywealthgrowth.com, says that when sectoral and thematic funds give good returns, the outlook for a sector is very good. But these funds are sector based only. If the I sector doesn’t do well then your returns can be negative too. Historically it has been seen that investors invest in sectoral funds by looking at past returns but this is not the right way to invest in these funds.
Chetanwala says that investing in equity funds is more beneficial for any investor than sectoral funds as there are professional fund managers who invest in multiple sectors at once while managing market risk. He further added, “The volatility in sectoral funds is higher as compared to equity funds. The maximum investment in any investor’s portfolio should be in equity funds, if you want to invest in sectoral funds, then it should not exceed 5 to 10 percent of your portfolio.