Best Thematic Funds to Invest

Thematic funds are mutual funds that invest in stocks of multiple sectors, which are woven around a determined theme. These funds may invest in sectors following themes like rural consumption, rural India, international exposure, export-oriented, etc.

• Given the guidelines laid down by SEBI, Thematic funds must invest at least 80% of their funds in stocks/equities of companies that revolve around a particular theme
• These funds are considered moderately risky and hence, must be chosen wisely
• Investors of this fund must be willing t0 give a time period of around 5-7 years to thematic funds in order to let them perform in such a way that the inflation is beaten by the returns offered
• Additionally, before investing in these funds, investors must gain a proper understanding of the macroeconomic conditions and the future growth prospects of the particular theme

Also Read: What are Thematic Funds

Best Thematic Funds to Invest

*Data as on 27 May 2020; Source: Value Research

**The above list has been created on the basis of the Net Asset value of these funds

1. ABSL MNC Direct Fund

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

• The objective of Aditya Birla Sun Life MNC Fund is to achieve growth of capital at relatively moderate levels of risk by investing in securities of multinational companies through a research based investment approach
• The fund is suitable for investors looking for long term capital growth with an investment horizon of more than 3 years
• The fund invests 80% of its assets in equity and equity related securities of multinational companies, while the remaining 20% can be invested in either equity other than MNCs and/or debt securities or money market instruments

2. SBI Magnum Global Direct Fund

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

• SBI Magnum Global Fund aims to provide the investors with opportunities of long term capital appreciation through active management of investments in a diversified portfolio comprising primarily of MNCs
• The fund is bound to invest a minimum of 80% of its assets in stocks of companies within the multinational space
• SEBI’s guidelines allow the fund to invest 20% of its assets in equities of companies outside the MNC space and/or debt securities or money market instruments
• The fund managers of SBI Magnum Global Fund follow a bottom-up approach in stock picking and can choose companies across sectors or market capitalization that fall under the MNC criteria

3. SBI Magnum Equity ESG Direct Fund

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

• SBI Magnum Equity ESG fund invests in companies following the Environmental, Social and Governance (ESG) criteria
• Companies are scored across parameters from Governance, Social and Environmental aspects of the company’s management of its affairs
• The fund invests 80-100% of its assets in equity and equity related instruments following the ESG criteria, while 0-20% can be invested in other equities and/or debt or money market instruments

4. UTI Dividend Yield Fund

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

• UTI Dividend Yield Fund predominantly invests in dividend yielding equity and equity related securities
• The fund, additionally, looks forward to the generation of cash flow, management quality, and earning growth prospects, along with yielding dividend for its investors
• The fund has the flexibility to position itself actively across the market cap spectrum
• The fund is suitable for investors with an investment horizon of 3 to 5 years

5. ICICI Prudential India Opportunities Fund

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

• The fund has the objective of generating long term capital appreciation by investing in opportunities presented by special situations such as corporate restructuring, Government policy and/or regulatory changes, companies going through temporary unique challenges and other similar instances
• The scheme is considered suitable for conservative investors looking for higher returns and medium term goals
• The fund is capable of meeting investment goals such as long term SIP, retirement planning, and wealth creation at the stake of moderate level of risk involvement

Advantages of Investing in Thematic Funds

• Thematic funds are focused towards a specific theme and can be considered more diversified than sectoral funds
• Thematic funds can be whimsical, irrespective of the high risk involved; these funds tend to perform better with an increasing number of companies/sectors that are being invested in
• If any of the companies in the fund’s portfolio has a long winning streak, the investors will directly benefit from it highly
• Thematic funds are considered better for medium to long term investments
• These funds are better suited to investors who are mature, follow the market well and have the capability to make analytical decisions

How to Invest in Thematic Funds

You can invest in Thematic 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. What is the difference between Sectoral and Thematic funds?

Ans. Sectoral funds invest in stocks of only one given sector, whereas Thematic funds invest in stocks of multiple sectors that follow a specific, determined theme.

Ques. Are Thematic funds safe to invest?

Ans. Yes, Thematic funds are safe to invest in. However, these funds involve a moderately high level of risk and require a deep understanding of the theme that the fund invests in. Hence, one should be an aggressive investor and analyst in terms of studying the market fluctuations.

Ques. How much share of a portfolio should be invested in Thematic funds?

Ans. Thematic funds should not constitute any more than 5-10% of an investor’s portfolio.

Ques. Are Thematic funds good?

Ans. Thematic funds are good if you are looking for medium to long term investments, as you might have to withdraw your investment if the particular theme does not perform well. Additionally, you must be well-versed with the market trends around the theme and make informed decisions while investing in a Thematic fund.

Ques. Which are the best Thematic funds to invest in 2021?

Ans. Given their Net Asset Value, you can invest in the following Thematic funds this year-

1. ABSL MNC Direct Fund
2. SBI Magnum Global Equity Fund
3. SBI Magnum Equity ESG Fund