Thematic funds are a category of mutual funds that invest in companies that belong to a particular theme or sector. Thematic funds are popular among investors who want to invest in a specific sector or theme they believe has potential for growth in the future. In this article, we will discuss the basics of thematic funds, the different types of thematic funds, and how to choose the right thematic fund for your investment portfolio.
Basics of Thematic Funds:
Thematic funds are mutual funds that invest in companies that belong to a particular theme or sector. The investment theme can be based on various factors such as technology, healthcare, consumer goods, infrastructure, etc. The fund manager of the thematic fund invests in companies that are related to the theme of the fund. The objective of the fund manager is to generate returns by investing in companies that have the potential to grow in the future. Thematic funds are different from diversified equity funds because they focus on a specific theme or sector.
Types of Thematic Funds:
There are different types of thematic funds available for investors. Some of the popular types of thematic funds are:
Technology Thematic Funds: These funds invest in companies that are related to the technology sector. The fund manager invests in companies that are involved in software, hardware, telecommunications, and other technology-related industries. For example, Franklin Technology Fund, which invests in companies involved in technology hardware, software, and services.
Healthcare Thematic Funds: These funds invest in companies that are related to the healthcare sector. The fund manager invests in companies that are involved in pharmaceuticals, biotechnology, healthcare services, and other healthcare-related industries. For example, Nippon India Pharma Fund, which invests in companies involved in healthcare equipment, services, and biotechnology.
Consumer Goods Thematic Funds: These funds invest in companies that are related to the consumer goods sector. The fund manager invests in companies that are involved in retail, consumer durables, and other consumer goods-related industries. For example, Canara Robeco Consumer Trends Fund, which invests in companies involved in food and beverages, household products, and personal care.
Infrastructure Thematic Funds: These funds invest in companies that are related to the infrastructure sector. The fund manager invests in companies that are involved in construction, engineering, and other infrastructure-related industries. For example, Invesco Infrastructure Fund, which invests in companies involved in transportation, utilities, and other infrastructure-related industries.
Choosing the Right Thematic Fund:
Investors who want to invest in thematic funds should consider the following factors before investing:
Investment Objective: Investors should choose a thematic fund that matches their investment objective. For example, if an investor wants to invest in the technology sector, they should choose a technology thematic fund.
Risk Appetite: Investors should consider their risk appetite before investing in thematic funds. Thematic funds can be risky because they invest in a specific sector or theme. Investors should invest in thematic funds only if they can tolerate the risk.
Fund Manager: Investors should consider the fund manager’s experience and track record before investing in a thematic fund. A good fund manager can help generate returns by investing in the right companies.
Expense Ratio: Investors should consider the expense ratio of the thematic fund before investing. The expense ratio is the annual fee charged by the fund house to manage the fund. A high expense ratio can eat into the returns generated by the fund.
In conclusion, thematic funds are an excellent investment option for investors who want to invest in a specific theme or sector. However, investors should choose the right thematic fund that matches their investment objective and risk appetite. It is also essential to consider the fund manager’s experience and track record before investing in a thematic fund.
