Thematic funds are those that invest at least 80% of their total assets in stocks of a particular theme. For example, a PSU fund has a portfolio that invests in a basket of PSU stocks like SBI, Coal India, ONGC and so on. An infrastructure fund will invest in stocks connected to the development of infra in sectors like construction, cement, etc. and will own companies like Larsen and Tou- bro, UltraTech Cement, KNR Construction.
WHO SHOULD CONSIDER A THEMATIC FUND?
Financial planners suggest first time investors should avoid thematic funds and start with diversified equity mutual funds. Once your core portfolio is built and you are looking to generate alpha and understand the risks associated with it, you could opt for a thematic fund.
HOW SHOULD YOU INVEST IN SUCH A THEME?
Like for any equity-oriented scheme, investors can make both lump sum and systematic investments in these schemes. If investors believe there are certain events that will unfold over a year in a sector they can do SIP or else, they can invest lump sum.
WHAT RISK DO THESE FUNDS CARRY?
Risk and reward both could be higher in thematic funds. Thematic funds invest in a narrow range of stocks and hence carry high concentration risk. If you invest at a time when the economy works in favour of the underlying companies, then these schemes could give you high returns.
