Best Sectoral Funds to Invest

Sectoral funds are the ones that invest in stocks of only one sector. These funds are bound to invest at least 80% of their assets in a specified sector, while the remaining can be invested in other securities.

• Sectoral funds are considered high risk schemes and must be considered only by the investors who have complete knowledge of the market and are regular with tracking the macroeconomic situation in the country
• The suggested investment horizon for these funds is more than 5 years; if the investors redeem their investment before that, it is much likely that they would not receive positive results
• While investing in these funds, investors must consider the future growth opportunities in that sector and then make a choice, rather than looking at the past performance of the fund and/or sector
• It is strictly advised that investors do not invest more than 5-10% of their funds in such schemes, considering the volatility of sectoral funds

Also Read: What are Sectoral Funds

Best Sectoral Funds to Invest

**The above list has been created on the basis of the Net Asset value of these funds*Data as on 27 May 2020; Source: Value Research

1. L&T Infrastructure Fund

(Data as on 27 May 2020; Source: Value Research)

• L&T Infrastructure Fund is an open-ended scheme investing only in the infrastructure sector
• The fund aims to generate capital appreciation by investing predominantly in equity and equity related instruments of companies in the infrastructure sector
• The fund has allocated 80% of its assets to equity and related securities in the infrastructure sector and 20% to debt and money market instruments, which involve lesser risk
• The fund is considered suitable for investors who have a deep understanding of the infrastructure sector, with a high risk appetite and an investment horizon of more than 5 years

2. SBI Banking & Financial Services Direct Fund

(Data as on 27 May 2020; Source: Value Research)

• SBI Banking and Financial Services Direct Fund aims to provide investors with the opportunities for long term capital appreciation by predominantly investing in equity and equity related securities of banking and financial services
• The fund has the flexibility to invest 20% of its assets in equities other than banking and financial services and/or debt and money market instruments
• The fund is suitable for investors who have an in-depth understanding of banking and the financial sector and are willing to accept high risk in return for high returns when the markets perform in favor

3. Franklin Build India Fund

(Data as on 27 May 2020; Source: Value Research)

• Franklin Build India Fund invests in companies that are engaged, directly or indirectly in infrastructure related activities
• The fund’s investment is oriented towards structural themes and not cyclical themes comprising of companies across the market capitalization range
• The fund must be considered as an investment option only by investors with an investment horizon of 5 years or more, along with a high risk appetite
• The fund tends to meet the goals of long-term wealth creation of investors

4. DSP India T.I.G.E.R. Fund

(Data as on 27 May 2020; Source: Value Research)

• DSP India T.I.G.E.R. Fund claims to invest in companies that will gain from the government’s policies on infrastructure growth and economic reforms
• The fund offers a portfolio that is substantially constituted of equity and equity related securities of corporates that could benefit from structural changes by investments in infrastructure, both by public and private sectors
• The scheme intends to benefit from the increased government spending on infrastructure and increasing private participation

5. SBI Infrastructure Direct Fund

(Data as on 27 May 2020; Source: Value Research)

• SBI Infrastructure Fund aims to provide investors with opportunities for long-term capital growth through active management of investments in stocks of companies directly or indirectly involved in the infrastructure growth in the Indian economy
• The fund is bound to invest a minimum of 80% of its assets in the infrastructure sector
• The scheme has the liberty to invest the remaining 20% of its assets in equities other than companies related to infrastructure space and/or debt securities or money market instruments
• The fund is considered suitable for investors with very high risk appetite and an investment horizon of at least 5 years

Advantages of Investing in Sectoral Funds

• Sectoral funds tend to offer potentially high returns if chosen correctly
• These funds hold stocks across all market capitalization within the specific sector
• Investments in Sectoral funds also allow investors to diversify their portfolio by allocating a limited share to each sector and buying the funds accordingly across each of the sectors

How to Invest in Sectoral Funds

You can invest in Sectoral funds through either of the following ways-

• Offline mode of investing– If you are not confident of your knowledge, you may choose to invest through a broker. However, investing in a fund through a broker will make you eligible for investments through regular plans that offer different returns and varied expenses in investment. If you wish to invest in the fund independently, you must visit the nearest branch of the AMC of your fund. Don’t forget to carry the following documents-
  • Identity Proof (Aadhar Card)
  • Canceled cheque
  • Passport size photos (around 4-5)
  • PAN Card
  • KYC documents (for KYC verification)
• Online mode of investing– If you do not wish to add on to your expense of commissions or brokerage, you may visit online investment platforms such as Paisabazaar.com wherein you can choose from and compare more than 1,700 funds- all in one place, instead of following the long procedure of visiting the website of each AMC and then choosing from them. Here, you can select the fund in which you want to invest, look at the details and compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment

Frequently Asked Questions

Ques. Are Sectoral Funds safe?

Ans. Sectoral funds are safe, but involve a high level of risk. Hence, you must carefully study the growth prospects of the fund you are planning to invest in.

Ques. I am a new investor. Can I invest in a Sectoral fund?

Ans. If you are a new investor, it is strictly advised that you refrain from investing in sectoral funds. The high level of volatility involved in these funds asks for an in-depth understanding of the market and experience in investing.

Ques. Should I put all my money in one sectoral mutual fund?

Ans. No, you should never put all your funds in any one mutual fund. Diversification in the portfolio is one of the most important points to be considered while investing. Moreover, Sectoral funds depend solely on the performance of only one sector, hence the level of risk involved is quite evident. Experts advise that your portfolio should not be constituent of more than 5-10% of sectoral funds.

Ques. Are Sectoral and Thematic funds the same?

Ans. Sectoral and Thematic funds are not the same but can be considered similar. Both the funds differ in terms of their asset allocation. While Sectoral funds invest in stocks of only one specific sector, Thematic funds invest in stocks of multiple sectors revolving around a theme.

To learn more about the difference between Sectoral and Thematic Funds, Click here.