What is a Thematic Fund?
Thematic Fund - Should you consider Investing?
Thematic funds, as the name implies, invest in a particular theme or industry, such as healthcare, technology, or energy. Investors can choose from several thematic funds in India.
Your investment objectives, risk tolerance, and time horizon should all be taken into account before investing in a thematic fund. Because they are concentrated on a certain theme or industry, thematic funds might be more volatile than diversified funds. This means that their performance can fluctuate significantly depending on the state of the market and the performance of the underlying firms within the theme.
If you are thinking about investing in an Indian theme fund, you should carefully assess the fund's investment philosophy, holdings in its portfolio, and track record. Choose a fund with a proven track record of success, a well-diversified portfolio, and a sound investment approach that fits your investment objectives and risk appetite.
You should also take into account the fund's expenses, including the expense ratio and any extra costs. Due to their narrow emphasis, thematic funds frequently have higher expense ratios than other types of mutual funds.
The risk associated with thematic funds is higher, despite the possibility of bigger rewards. It's critical to thoroughly consider your investment objectives, risk tolerance, and investment strategy before investing in a thematic fund in India.
Some of the popular categories of Thematic funds include:
Banking and Financial Services Funds: These funds invest in companies within the banking and financial services sector. There are currently 17 schemes with a total AUM (Assets Under Management) of approximately Rs. 19,675 crores.
Infrastructure Funds: These funds invest in companies involved in infrastructure development and related sectors such as power, transportation, and construction. There are currently 8 schemes with a total AUM of approximately Rs. 5,864 crores.
Pharma and Healthcare Funds: These funds invest in companies within the healthcare and pharmaceuticals sector. There are currently 12 schemes with a total AUM of approximately Rs. 7,958 crores.
Technology Funds: These funds invest in companies within the technology sector such as information technology and software development. There are currently 11 schemes with a total AUM of approximately Rs. 17,710 crores.
Consumption Funds: These funds invest in companies that are involved in the consumer goods and services sector such as FMCG, retail, and hospitality. There are currently 10 schemes with a total AUM of approximately Rs. 21,074 crores.
Energy and Natural Resources Funds: These funds invest in companies involved in energy and natural resources such as oil and gas, mining, and renewable energy. There are currently 4 schemes with a total AUM of approximately Rs. 710 crores.
Global Funds: These funds invest in companies outside India and can have a thematic focus such as technology or healthcare. There are currently 10 schemes with a total AUM of approximately Rs. 2,356 crores.
A few more categories that are popular are PSU Fund and Infrastructure Fund. While some classify Infrastructure as sectoral it can be compared to Thematic as well. However, what matters is the view and the direction of the market based on the given theme. In the last year, Thematic funds got decisive attention and ranked in the top 6 by performance and assets in the scheme went up to Rs.1,73,500 Crores as of Nov 2022 (Ace MF data) by 20% in the 11 months from Jan 2022.
So make your smart pick if you know your risk profile and the scheme risk (like the back of your hand). Don't ever bet on this category without your homework and never on hearsay.
A big opportunity in discovering the potential does exist but comes with a lot of due diligence risk.
Make hay if you know that the Sun will shine on your portfolio.
Types of Thematic Funds
Banking & Financial Services Fund
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Infrastructure Fund
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Pharma & Healthcare Fund
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Warm Regards,
Compositedge MF Team.
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