Sector Mutual Funds are the equity plans that allows you to invest in particular or specific sector (Utilities/ Energy/ infrastructure/ Gold/ Real/ Debt, etc.) of the economy. These Sector Funds also known as Sectoral Funds allowing you to invest in sticks of different companies depending on the market capitalizations and risks associated with, which allows the investor to invest in the best stock performing company in a particular specified sector. These sector funds allow you to gain good returns but on the other side it comes with risks. Sector Mutual Funds targets for boosting the expansion of the industries. these mutual funds are comparatively posing less risk than the equity funds. As mutual funds spread their capital across different organizations. Also, to make these funds more effective and profitable they target at the zones that have good track record, for good returns or one can expect god growth in the future.
What are the features of sector Mutual Funds?
Tax-
Tax on dividends and Tax on capital gain are imposed.
Higher Returns-
These sector mutual funds provide higher returns as they concentrate on specific zones that offer good returns.
Risk-
Comparatively less than the equity fund investments.
Check what are the types of Sector Mutual Funds:
Real Estate Funds:
This allows the investor to invest in the real estate market with a small or large Investing corpus the suits the investor.
Utility Funds:
As the name itself explains it allows you to invest in the companies who are strong in utility sectors, also this kind of funds focus on offering stable dividends.
Natural Resources Funds:
These are the investing companies like Oil, gas. energy, forestry, natural gas, timber, etc. related industries.
Technology Funds:
This kind of funds allows you towards the technology sector or the technology related companies.
Financial Funds:
These are the funds that allows you towards the financing companies like banking, insurance, accounting firms, and other financial investors.
Communication Funds:
These are the funds allows you to invest in telecommunication sector, internet-related companies, etc.
Healthcare Funds:
It includes all healthcare or medical institutions including pharmaceutical, path lab chains, etc.
Precious Metal Funds:
It allows you to invest in precious metals like gold, platinum, silver, copper and palladium, etc.
Top Sector Mutual Funds in India:
• Tata Digital India Fund
• ICICI Prudential Technology Fund
• Aditya Birla Sun Life Digital India Fund
• SBI Technology Opportunity Fund
• Franklin India Technology Fund
Benefits:
• Diversification of Portfolio
• Higher returns
• Sector funds are focused.
• Holds stocks across all the market capitalization.
Disadvantages:
• High Volatility
• If not chosen correctly may affect heavily on returns
• Knowledge on markets and macroeconomics is necessary.