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.


Sector Mutual Funds | Meaning, Types and Factors

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What are Sector Mutual Funds?

Sector mutual funds are equity investment plans that focus on a specific economic sector. Sector mutualĀ funds areĀ also known as sectoral funds, whichĀ can invest in stocks of firms with different market capitalisations and security classes. These funds enable investors to invest in the best-performing stocksĀ of a certain sector. Utilities, energy, and infrastructure are examples of such sectors....

Types of Sector Mutual Funds

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Factors to Consider Before Investing in Sector Mutual Funds

1. Technology Funds: These mutual funds mostly invest in electronics and information technology firms....

Why Should You Invest in Sector Mutual Funds?

1. Exposure Limit: Before investing in sector funds, investors should have a well-diversified portfolio of regular funds. Although you will be placing all of your eggs in one basket, you should have a well-balanced portfolio and limit your sector exposure to 5-10% of your portfolio value....