Focused Funds also popularly known as Best idea funds/ Concentrated funds/ Under-diversified funds. Unlike the other investment instruments, these funds choose a limited number of companies for purchasing stocks. The motive of these funds is to produce maximum returns which can be achieved by investing high performing assets. Many other funds offer diversified stocks to invest in different companies, but the output is not as expected, as all companies may not perform well simultaneously, this may effect on the value of returns, and this is the reason why focused mutual funds do not go for many companies to invest stocks, they invest in 20 to 30 companies, that to high performing companies, as they look for higher returns and that can be possible with the high performing companies. Focused funds are subjected to tax implications, like for focused equity funds, the tax is implied based on short- and long-term capital gains. Long term capital gain equity funds come with 10% tax. Short term capital gains subjected to 15% taxation. Long term capital gains for debt funds are taxable up to 20%.
What makes Focused Funds different from other funds?
|Focused Funds||Other Mutual Funds|
|Allocates their holdings across restricted number of equity and debt funds.||These mutual funds do not have any restrictions and allows to invest across number of stocks.|
|They do not allow diversification of funds||They allow diversification of funds.|
|Returns are more volatile||comparatively less volatile than focused funds|
|Riskier than the mutual funds with large number of stocks.||Some mutual funds come with risks and the other offers minimal risk, so investor must choose accordingly.|
|Offer higher returns||Returns depends on market performance|
What are the Advantages of Focused Funds?
- It offers better researched investment options.
- Offers higher returns.
- As the investment options are limited, investor can select the stock for investment easily.
List of India's Top Focused Funds:
- IIFL Focused Equity Fund
- Axis Focused 25 Fund
- Motilal Oswal Focused 25 Fund
- Sundaram Select Focus
- Principal Focused Multicap Fund