Sectoral Mutual Funds

Sectoral Mutual Funds are a type of equity mutual fund that invests primarily in a specific sector of the economy. These funds focus on companies operating in particular industries, such as technology, healthcare, finance, energy, or real estate. By concentrating investments within a specific sector, these funds aim to capitalize on the growth potential of that particular segment of the market.

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Best Sectoral Mutual Funds to Invest in India 2024

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ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedDSP Investment Managers Private LimitedHSBC Asset Management(India)Private LtdIDFC Asset Management Company LimitedCanara Robeco Asset Management Co. Ltd.Franklin Templeton Asst Mgmt(IND)Pvt LtdEdelweiss Asset Management LimitedInvesco Asset Management (India) Private LtdQuant Money Managers LimitedMirae Asset Mutual FundPPFAS Asset Management Pvt. LtdSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdMotilal Oswal Asset Management Co. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.PGIM India Asset Management Private LimitedLIC Mutual Fund Asset Management LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.Fund PineBridge Mutual FundJM Financial Asset Management LimitedUnion Asset Management Co. Pvt. Ltd.Baroda Asset Management India LimitedPrincipal Asset Management Private LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundWhiteOak Capital Asset Management LimitedBajaj Finserv Asset Management Limited360 ONE Asset Management LimitedBank of India Investment Managers Private LimitedITI Asset Management LimitedNJ Asset Management Private LimitedNavi AMC LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdTrust Asset Management Private LimitedGroww Asset Management Ltd.Helios Capital Asset Management (India) Private LimitedTaurus Asset Management Company LimitedShriram Asset Management Co LtdZerodha Asset Management Private LimitedOld Bridge Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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Advantages of Investing in Sectoral Mutual Funds

  • High Growth Potential

    Sectoral mutual funds target specific high-growth sectors, offering the potential for substantial returns if the chosen sector performs well.

  • Expert Management

    These funds are managed by professionals with specialized knowledge of the sector, leveraging their expertise and industry insights to make informed investment decisions.

  • Focused Exposure

    Investors gain concentrated exposure to a particular sector, allowing them to capitalize on the performance of that industry without the need to pick individual stocks.

  • Tactical Allocation

    Sectoral funds enable investors to adjust their portfolio based on market conditions and sectoral outlooks, providing flexibility to benefit from cyclical trends in specific industries.

  • Portfolio Diversification

    Adding sectoral mutual funds to an existing diversified portfolio can enhance overall diversification by including specific industry exposure, balancing the risk and return profile.

  • Access to Specialized Sectors

    Sectoral funds provide access to specialized and niche sectors that might be difficult for individual investors to invest in directly, such as biotechnology, renewable energy, or emerging technologies.

Disadvantages of Investing in Sectoral Mutual Funds

  • High Risk and Volatility

    Sectoral mutual funds are inherently more volatile than diversified equity funds. Since they are concentrated in a specific sector, their performance is highly dependent on the fortunes of that sector. Any negative developments or downturns in the sector can lead to significant losses.

  • Lack of Diversification

    Investing heavily in a single sector means that the fund's performance is not cushioned by investments in other sectors. This lack of diversification increases the risk as poor performance in the chosen sector can significantly impact the entire investment.

  • Sector-Specific Risks

    Each sector has unique risks that can affect its performance. For example, technology funds may suffer due to rapid technological changes, healthcare funds might be impacted by regulatory changes, and energy funds can be influenced by fluctuating commodity prices. These sector-specific risks can lead to underperformance.

  • Economic Cycles

    Different sectors perform differently during various phases of economic cycles. Sectoral funds can be highly cyclical, performing well during certain phases and poorly during others. Timing the market to capitalize on these cycles can be challenging and may lead to suboptimal returns if done incorrectly.

  • Limited Flexibility

    Once invested in a sectoral fund, investors are locked into that sector unless they decide to sell their holdings. This limited flexibility can be a disadvantage if the investor’s outlook on the sector changes or if better investment opportunities arise in other sectors.

Points to consider before investing in Sectoral Mutual Funds

  • Risk Tolerance

    Sectoral funds are highly volatile and carry significant risk. Ensure that your risk tolerance aligns with the potential ups and downs of investing in a single sector. If you are risk-averse, these funds may not be suitable for you.

  • Investment Horizon

    Sectoral mutual funds are better suited for long-term investors who can withstand short-term volatility. Ensure you have a sufficiently long investment horizon to ride out market fluctuations and benefit from potential sectoral growth.

  • Sector Analysis

    Conduct detailed research on the sector you plan to invest in. Understand the growth drivers, potential risks, and economic factors that could impact the sector's performance. A deep understanding of the sector’s dynamics is crucial for making informed investment decisions.

  • Portfolio Diversification

    While sectoral funds offer focused exposure, they should only be a part of a well-diversified portfolio. Ensure that your overall investment portfolio is diversified across various sectors and asset classes to mitigate risk.

  • Market Timing

    Consider the current economic cycle and market conditions. Investing in sectoral funds requires careful timing as different sectors perform better at different stages of the economic cycle. Avoid investing based solely on recent performance.

  • Fund Performance and Management

    Analyze the historical performance of the sectoral fund, keeping in mind that past performance does not guarantee future results. Also, evaluate the expertise and track record of the fund manager to ensure they have the experience and knowledge to navigate the sector effectively.
     

How to Start Investing in Sectoral Mutual Funds with INDmoney

Now that you have understood what Sectoral Mutual Funds are, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC (Know Your Customer).

  • Step 2

    Once your free investment account is ready, you can either search for an Sectoral Mutual Fund or go to the mutual fund section and tap on Sectoral Mutual Fund from Discover All Categories.

  • Step 3

    Choose an Sectoral Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, expense ratios, and underlying stocks and sectors.

  • Step 4

    You can choose to set up a SIP in an Sectoral Mutual Fund or even invest as a lump sum. Once you are on the individual Sectoral Mutual Fund page, click from the bottom “One-time” for lump sum investment or “SIP” for a systematic investment plan.

  • Step 5

    Choose the amount that you want to invest as SIP or Lump Sum.

  • Step 6

    Set up payments. If you choose to set up SIP in an Sectoral Mutual Fund, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lump sum (one-time) then you can pay via UPI, net banking, NEFT, or RTGS.

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