Focused Funds

Focused Funds help you to concentrate your money on stocks generating high returns or any investment theme. Options to invest in companies like HDFC, Tata, Invesco and more are available, which your fund managers believe will outperform in the market.

Average category return of 20% to 27%

Investment in well-researched stocks

Perfectly aligns with long-term goals

Potential for active management of risk

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List of Best Focused Funds Based on Last 3-Year Returns

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What are Focused Mutual Funds?

Focused funds are those mutual funds which can have a maximum of 30 companies in the fund. According to the regulations by the Securities and Exchange Board of India (SEBI), the fund manager can choose these 30 companies from any range be it Focused Funds, medium cap or small cap. These stocks in the focused mutual funds are closely related to each other.

The focus of the fund is generally concentrated in a particular sector or domain. For example, there may be a focused mutual fund that is only investing in the healthcare sector because the fund manager analyzes that the healthcare sector might perform well in future. Then he will choose stocks for the following mutual fund accordingly.

Benefits of Investing in Focused Funds

High Returns
The probability of yielding high returns in focused mutual funds is high as the funds are invested in a limited set of companies. This results in higher returns with increased probabilities.
Diversification across Companies
Focused funds allow the inventors the freedom to invest in diverse company sizes and are not restricted to any specific spectrum. This freedom to invest in 30 different stocks can let them split between companies depending on the market conditions. Hence, investors get the flexibility to switch across markets and earn higher profits.
Exposure to the High Performing Stocks
Since the number of companies in which the money of the retail investor will be invested is limited, the fund manager devotes more time over analyzing each company. This ensures that he thoroughly studies the company inside out. Hence, the chances that the stocks that will be selected in the fund will be high-performing are higher.

Limitations of Investing in Focused Funds Mutual Funds

Limited Diversification
The number of stocks in which your money can be invested is limited to a maximum of 30 companies. Hence, there is little to no scope for diversification in the portfolio.
Lack of Control Over your Investments
Since focused funds are invested in a concentrated number of stocks, these are researched and analyzed by the fund managers before investing in them. Therefore, you need to be completely dependent on the experience and expertise of your fund managers to make such decisions on your behalf, providing you with limited control over your investment.
Short-Term Volatility
Focused funds are concentrated on a few stocks and hence if the performance of some stocks turns out to be volatile, it can affect the possible returns on your entire investment. Hence if you have a risk appetite, investing in such funds can be feasible, as you get maximum returns in the long run.

Who should invest in Focused Funds Funds?

Investing in the top Focused Equity Funds can be ideal for investors with specific objectives. So below are some of the categories of investors who should consider investing in focused funds.

Investors with Experience
Focused funds may be an ideal option for investors who are very experienced in the market. Focused funds are generally more volatile as compared to other mutual funds as they react aggressively to sector-specific news. Thus, experienced investors can understand the risk associated with it and proceed with their plan of investment accordingly
Investors with an Appetite for Risks
For investors with higher risk appetites, focused mutual funds could be a great investment option. Since the chances of getting higher returns are increased, the chance for risk or loss also increases accordingly.
Investors with Long Investment Horizon
Investors who are seeking to invest their money for a longer time frame can choose focused mutual funds
Investors Seeking for Potentially Higher Returns
Even though focused funds are the ideal choice for investors with an appetite for risks, they can also provide the maximum returns. This is because these are invested in well-researched and analyzed funds having decent records. So if you are among the ones ready to depend on such research from your fund manager, these are the best options for you.
Investors Who Want to Invest in Concentrated Portfolio
If you do not want to diversify your investment in different types of companies or stocks, then focused funds can be a suitable option. In this type, you can easily invest in a maximum of 30 stocks, keeping your portfolio less diversified and more impactful.
Investors Wanting to Invest in a Specific Industry
If you want to invest money in a specific sector or industry, such as the automobile industry or the healthcare sector, then focused mutual funds could be an ideal option for you.

How to Start Investing in Focused Funds Through IND Money?

Once you are aware of the pros and cons of focused funds, you need to ensure that your financial requirements align with this fund. After that you can start investing in focused cap mutual funds through INDMoney by proceeding through a few simple steps as given below:

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 a focused mutual fund or go to the mutual fund section and tap on focused mutual funds.
Step 3
Choose a focused 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 SIP in focused mutual funds or even invest as lumpSum. Once you are on the individual focused mutual Fund page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan.
Step 5
Choose the amount that you want to invest as SIP or LumpSum.
Step 6
Set up payments. If you choose to set up SIP in focused mutual funds, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

Should You Invest in Focused Funds?

Therefore, focused funds are concentrated funds that are restricted to a limited number of stocks. So, it is a suitable option for investors with long-term investment plans. Even though there are not many chances of diversification to mitigate the risks associated with it, focused funds are dependent on the expertise of the fund managers. And hence, it can generate potentially higher benefits as well.

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Frequently Asked Questions

Focused funds are often run by well-reputed AMCs which offer steady and consistent results and have less volatility. Some of the best-performing Focused funds you can invest your money in 2024 are:

SBI Focused Equity Fund
HDFC Focused 30 Fund
Axis Focused 25 Fund
Mirae Asset Focused Fund

Your returns from Focused mutual funds will be taxed under two categories.

Under Capital Gains: Short-term capital gains at 15%; Long-term capital gains (over Rs. 1 lakh) at 10%.
Tax on Distributed Income Dividend Option: At applicable income tax slab

Yes, Focused Funds mutual funds have certain risks involved with them, but they are not as high as mid cap or small cap funds. For this reason, the returns on these funds are stable and suitable for conservative investors.

As an investor, you should look at the following features of a Focused mutual fund before making a decision.

Historical performance of the fund manager
Expense ratio
Past performance of the Focused MF
Fund portfolio

Try to invest your money in a Focused fund for a minimum of 3 to 5 years to get a good return after the tenure ends.

The average return on a one-year Focused mutual fund is generally 16.15% depending on the market. However, as the market is volatile, you cannot expect to get the same return as you got in the previous years.