The Buyt Desk
Have you encountered the word Mutual Funds and want to know more about it? Here is a complete guide on the same.
Thematic mutual funds are also equity oriented mutual funds. The only difference is that this mutual fund invests in stocks of a specific theme. These are broader-based than the sectoral fund, and it selects the companies and sectors for investment connected with a theme. E.g. the infrastructure thematic mutual funds will invest in cement, steel and power companies.
The fund offers an attractive return. If we consider the last one-year performance, then the fund has delivered 62.2%, and the three and five-year investment returns are 22.76 % and 14.23%.
What is the Risk Percentage In Thematic Mutual Fund?
The thematic mutual fund can be volatile in the short term as it is a high-risk investment. It is because it is a theme investment, so its success depends on the theme. If it doesn’t perform as calculated, all stocks will underperform, resulting in a significant loss. Thus, the thematic mutual fund is suitable for those investors who are experienced and deeply understand the market they are investing in. Still, not more than 10% of investment should be done in this fund.
Different Advantages Of Investing in Thematic Mutual Fund
The thematic mutual fund offers its own set of benefits. Here are a few of them coming from the experts.
Provide More Diversification Than The Sectoral Fund -Thematic fund offers more diversification in profile than the sectoral fund. In sectoral funds, there is less diversification opportunity because it is restricted within the set sector. If the selected sector doesn’t perform according to your anticipation, it will negatively impact your portfolio. In thematic fund, there is much diversification as it invests in the theme business. E.g. If the mutual fund has a manufacturing theme, it will invest in all companies belonging to the manufacturing industry, such as chemical, construction, garments, engineering, etc. In this case, even if a company of one sector underperforms, the companies in other sectors are there to create the balance.
Higher Return If Hit The Right Spot – Thematic fund can give you a higher return if you are able to hit the right spot. The main challenge here is getting the correct theme as it requires careful monitoring, such as following up the news, tracking the market, etc.
Who Can Invest In The Thematic Mutual Fund?
This fund is apt for investors who have
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High-risk-taking appetite.
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Investors who are looking to get higher returns.
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Those investors who are well-informed and know the market well.
Things An Investor Should Consider Before Investing In The Thematic Mutual Fund
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One should have a clear understanding of their investment goal. It is good to have a long-term goal in the thematic mutual fund.
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The thematic mutual fund is a high-risk avenue. It is not a good investment product for first-time investors for the same reason.
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The expense ratio is the cost asset management companies charge to investors who invest in the thematic fund. Invest must have a clear idea about these charges.
