Why Should You Invest in Sector Mutual Funds?
Sector funds are intended to enable market participation for the investors whose portfolios lack exposure to a particular sector. They can also provide more diversification within a specific sector than would otherwise be achievable. The primary reason an investor would choose a sector fund is the same as for a specific individual stock. The investor believes that the sector is about to experience a period of high growth.
1. Substantial Returns: If a sector does well, the fund associated with that sector can provide significant returns. Each sector follows a cyclical pattern in which it performs well for a set period before declining. Fund managers invest during the downfall to profit immensely afterwards when the sector flourishes.
2. Long-term Gains: It may take some time for thematic funds to prove their true potential. Individuals can use mutual fund schemes to help them achieve long-term financial goals, such as creating a retirement fund or financing wedding or child-education expenditures.