Thematic vs Sectoral funds: Best investment strategy is for you
Trapti Kaushik
Trapti Kaushik
Thursday 12 Sep 2024
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The Thematic and Sectoral funds are both types of equity mutual funds, but they differ in their focus, and approaches to investment.

Lets breakdown them down and see which might be better for your investment strategy: 


Investment Focus- 

  • .In Thematic funds is theme based and spanning multiple sectors such as green energy, technology and urbanization while.


  • .In Sectoral funds is single sector or industry such as banking, healthcare and technology. 


Diversification- 

  • .In the Thematic funds, the relatively more diversified under across sectors, under a single theme that can be offer a growth opportunity.


  • .In the Sectoral funds, Limited diversification offers targeted exposures to a high- growth sector, potentially leading to higher returns. 


Risk Profile- 

  • .The Thematic fund is less risk because they are dependent on the performance of a specific theme. If the theme does not perform well, the entire fund might, suffer, regardless of individual companies’ performance. 


  • .The sectoral fund is more risk because they are not diversified across sectors. If the sector underperforms, the entire fund may be at risk. 


Suitability- 

  • .The thematic fund is good for those wanting broad growth in every type of field or multiple sectors. 


  • .The Sectoral fund id good for those who confident in only one sector or individual sector. 


Return Potential- 

  • .The Thematic fund is depended on the how well the theme does. 


  • .The Sectoral fund is depended on how well the sector perform. 


So, if you are comfortable with higher risk and are optimistic about a particular sector, a sector fund offers better returns. However, if you prefer a diversified portfolio focused on a long-term growth within a broader investment theme, a thematic fund is a safer bet. 


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