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What are Sector Mutual Funds?

What are Sector Mutual Funds?

Last Updated : Aug. 1, 2019, 3:43 p.m.

Simply put, sector mutual funds are those schemes that invest in a specific sector or industry. The choice of sector could be anything from banking to pharmaceuticals to FMCG to real estate; whichever seems like a productive investment from the viewpoint of the fund manager. Returns generated from these funds depends heavily on the performance of the sector in which the scheme has invested.

For Whom are the Sector Funds Suitable?

This is a high risk investment. Investors with a high level of acumen and intensive knowledge about a sector should look forward to invest in sector mutual funds. It is not every investor’s cup of tea, especially, new investors. Only investors with a high risk appetite and who want aggressive returns out of their investment should invest in these funds. Windfall gains and losses are a part of investments in sector funds.

What is the Benefit of investing in Sector Funds?

If the sector that you’re investing has great future prospects, then the sector mutual fund is going to give you high returns, more than large cap, small cap and mid cap funds. Also sometimes, you are intuitive about great prospects of a particular prospects, but don’t know which segment within the sector to invest in. In these cases, investing in sector funds can give you exceptional returns because the fund manager knows exactly the segment that will provide exceptional returns.

How Risky are Sector Funds?

As sector funds are specific in nature, there is no room for diversification in investment, thereby making sector mutual funds riskier than other equity mutual funds. Due to lack of diversification, there is no investment that can balance the loss. For instance, a multi cap fund portfolio consists of stocks of all kinds of companies – large cap, mid cap and small cap. So even if mid cap & small cap stocks underperform, large cap is going to balance the risk. But this is not the case with sector specific mutual funds.

Recommended Sector Funds to Invest In!

Sector Fund Name 1-Year Return 3-Year Return 5-Year return
Infrastructure DSP T.I.G.E.R. Fund -3.54% 5.97% 8.40%
Franklin Build India Fund -1.76% 7.64% 13.32%
Banking Reliance Banking Fund -3.32% 12.20% 12.68%
ICICI Pru Banking and Financial Services Fund 1.73% 12.90% 15.85%
Technology SBI Technology Opportunities Fund 3.90% 11.76% 10.74%
Aditya Birla SL Digital India Fund 1.35% 13.77% 11.68%

Note: All the data that has been mentioned in this article is sourced from Value Research as on July 31, 2019. All the data here are in regards to Regular Plan.

Disclaimer: “Mutual Fund Investments are subject to market risks, read all scheme related documents carefully before investing.

How to Invest in Sector Funds Online?

If you wish to invest in Sector Mutual Funds, you can do so through Wishfin, a financial marketplace, where you can choose the best sector funds for you and rule out the ones that doesn’t seem a great fit by comparing. To invest, all you have to do is follow the below mentioned steps:

If you are a new investor who is keen on investing, you need to follow the below mentioned registration process.

Registration Steps:

  • Mention your mobile number
  • Click on ‘Next’
  • Enter the One-time Password (OTP) received on your mobile number
  • Click on ‘Verify and Continue’
  • Mention full name, email, city
  • Create a password that must have the required number of alphabets, numeric and special characters
  • Click on ‘Sign Up’
  • Mention a few more details before the registration can be made successfully

Login Steps

  • Mention your email or mobile number
  • Click on ‘Get OTP’ to receive the same
  • Enter OTP at the prescribed space
  • Click on ‘Login’
  • Go to ‘Explore Mutual Funds’
  • Go to ‘Equity’ and then on to ‘Sector Funds’
  • Click on ‘Invest’ below any of the sector funds shown above

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