What are thematic funds?

Mutual funds with fund allocation across sectors in the stock market enable diversification of one's portfolio. However some of the scheme of mutual funds strictly accommodate only some sector specific stocks while some other diversify to the extent such that only related sectors that share some correlation form the part of such schemes. The latter with a common theme in respect of the number of different scrips and concentration of portfolio share similarity with equity schemes that are diversified.

Risk and Returns from thematic funds

With portfolio of such thematic funds scheme comprising only some select sectors that in fact share some relation, it is a risky bet. As any unfavorable event in a particular sector shall also cast a similar effect on the other related sector. But, as still thematic mutual fund schemes include a couple of sectors the likely risk in comparison to the riskiest mutual fund scheme category of sectoral funds is lesser. Some of thematic fund schemes are in the infra and energy sectors.

Suitable for whom?

In case you have an already diversified mutual fund portfolio and are scouting for some interesting and at the same time risky bets, you can consider investing in such funds. But before investing in an investor needs to be well-informed in respect of the underlying theme of the scheme as the same will help him or her to determine the write time to enter and exit the investment.

Nonetheless, as suggested by experts, retail investor class with not much know-how about such schemes should not bet on such unique mutual fund schemes and instead can invest in equity diversified mutual fund schemes for realizing decent returns over the term.

GoodReturns.in