Money Magnet: The Art of Crafting a Profitable Mutual Fund Portfolio

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Written By jiya ahuja

Mutual funds are a popular investment option among investors due to their potential for a high return rate and their relatively low-risk nature. A mutual fund is a collection of stocks, bonds, and other securities that are managed by professional fund managers. Mutual funds come in various sizes and types, and investors can choose a fund based on their financial goals, risk tolerance, and investment horizon. One type of mutual fund that investors can consider is thematic mutual funds. These funds invest in companies that are expected to benefit from a specific trend or theme. In this article, we will discuss the art of crafting a profitable mutual fund portfolio with a focus on the best thematic mutual funds available in India.

Before we delve into the best thematic mutual funds, let us first understand what a thematic mutual fund is. A thematic mutual fund invests in companies that are expected to benefit from a specific trend or theme. For example, a renewable energy fund may invest in companies that generate energy from renewable sources such as wind, solar, or hydro. Similarly, a healthcare fund may invest in companies that are involved in the research, development, and manufacturing of pharmaceuticals, medical devices, or healthcare services.

Now, let’s look at some of the best thematic mutual funds available in India.

  1. ICICI Prudential Technology Fund: This fund invests in companies that are involved in the technology sector such as information technology, electronics, and telecommunications. ICICI Prudential Technology Fund has given an average annualized return of 23.14% over the past five years.
  2. SBI Healthcare Opportunities Fund: This fund invests in companies in the healthcare sector such as pharmaceuticals, healthcare services, and medical devices. SBI Healthcare Opportunities Fund has given an average annualized return of 18.50% over the past five years.
  3. Aditya Birla Sun Life India GenNext Fund: This fund invests in companies that cater to the needs and aspirations of the growing Indian middle-class population such as retail, entertainment, and education. Aditya Birla Sun Life India GenNext Fund has given an average annualized return of 18.80% over the past five years.
  4. Franklin India Feeder – Franklin U.S. Opportunities Fund: This fund invests in companies listed on the US stock exchange across various sectors such as technology, consumer goods, and healthcare. Franklin India Feeder – Franklin U.S. Opportunities Fund has given an average annualized return of 19.75% over the past five years.
  5. Tata India Pharma & Healthcare Fund: This fund invests in companies in the pharmaceutical and healthcare sector in India. Tata India Pharma & Healthcare Fund has given an average annualized return of 18.04% over the past five years.

Investors must note that the above-listed mutual funds have the potential for higher returns than other mutual funds. However, investing in thematic mutual funds carries some risks that investors must be aware of. For instance, a fund dedicated to renewable energy may perform poorly if the government reduces its subsidies to the sector. Similarly, a fund that invests in the technology sector may be impacted by policies such as data privacy regulations or geopolitical tensions. Hence, investors must research and evaluate carefully before investing in any mutual fund.

When building a mutual fund portfolio, investors must also consider diversification. Diversification helps reduce the risk of losses in any single stock or sector. For instance, if an investor builds a portfolio of three or four thematic mutual funds, they must ensure that the funds are not heavily invested in the same sectors. A well-diversified portfolio could comprise a mix of large-cap and mid-cap mutual funds and have exposure to different sectors such as banking and finance, consumer goods, and manufacturing.

To summarize, thematic mutual funds can deliver substantial returns to investors who understand the risks associated with investing in them. Investors must examine the fund’s investment philosophy, management team, past performance, and expense ratio before investing. Additionally, investors must also diversify their portfolio to lower their risk exposure. Lastly, no investment is devoid of risk, and investors must carefully consider their financial goals and risk appetite before investing in any mutual fund.

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