Sectoral, thematic mutual funds gaining popularity: 4 factors that attract investors
The Assets under Management (AUM) of sectoral/thematic funds have increased by 30% to ₹2.18 lakh crore in October 2023 from ₹ 1.68 lakh crore in October 2022.
Mutual funds have become a popular investment category. However, investors must invest in suitable mutual funds that align with their goals and risk tolerance.
Data from AMFI shows that the investors’ interest in sectoral/thematic funds that invest in specific sectors, such as PSU companies, has grown more than diversified funds that invest in various sectors.
The AUM of sectoral/thematic funds has increased by 30% to ₹2.18 lakh crore in October 2023 from ₹ 1.68 lakh crore in October 2022. In the same period, the flexi cap funds' AUM has increased by 16%. The attractive returns of these funds are just one of the reasons behind the attraction of sectoral/thematic funds.
For instance, PSU thematic funds are currently ranked second in the 1-year returns chart with 33.32% and tops the 3-year returns chart with 35.80% returns. Anyone would be tempted to invest in these funds by looking at this data at insolation.
In this article, we will see what’s driving investors to invest heavily in these funds and what they should do.
The greed and fear cycle is a recurring theme in the equity markets. Investors invest when there is hype in the market and sell their investments when the markets make a downturn. Many investors invest in the market after seeing their friends make a lot of money by investing in certain sectoral funds. This greed later converts into fear when they see their portfolio in red.
“Since 2020, a lot of new investors have jumped into the market. It's become super easy to start investing, especially from the comfort of your own home. But here's the thing –
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