Wealth creation is a long-term process which involves various strategic investments. These strategies involve a combination of short-term, mid-term and long-term perspectives. Since various wealth creating opportunities keep coming at different points of time, structuring the investment portfolio accordingly to reap the benefits through different categories of mutual funds helps boost the yield. One such category of schemes is Thematic Funds which can add substantial value to the overall investment portfolio. In fact, inclusion of thematic funds is an essential part of investment planning to create desired wealth in a stipulated time frame.
What are Thematic Funds?
Thematic Funds, typically, are open-ended equity funds. Such schemes invest in stocks of companies which are an overall part of an evolving specific theme or trends with considerable wealth creation opportunities. These funds aim to capitalise on emerging opportunities in companies of different sectors which are aligned with a particular theme. For instance, investment themes could be consumption, health care, housing, infrastructure, innovation, transportation, technology and sustainability, among others.
30 October 2024
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Why is investing in Thematic Funds important?
The core of the investment portfolio has to be a mix of diversified equity funds if the tenure is long-term. However, during this period of time different trends and investment themes keep popping up which unfold and gain momentum. A prudent investment strategy is always to keep looking for wealth creating opportunities which may last for a short to mid-term period. It is here that Thematic Funds pose their relevance and importance in capitalising such opportunities. It needs to be noted that thematic investments help investors stay ahead of the curve as when the themes start unfolding, value addition happens at a relatively faster pace and add boosters to the overall portfolio. A professional investment process which is based on intensive research and analysis helps in identifying the upcoming theme. Accordingly, the investment team headed by expert fund managers position the portfolios to make the most of the opportunity.
"A prudent investment strategy is always to keep looking for wealth creating opportunities which may last for a short to mid-term period. It is here that Thematic Funds pose their relevance and importance in capitalising such opportunities."
Which investors should consider and avoid Thematic Funds?
Investment through Thematic Funds is comprehensive in nature and is spread across a large spectrum of companies and sectors. Having said that, there are risks also associated with them as is the case with any scheme. There could be a possibility that some themes may take more than expected time to unfold and may not last for long. Therefore, investors need to keep a few factors in mind before investing in Thematic Funds.
Investors whose risk appetite is weak and have a short-term investment horizon may choose to stay away from Thematic Funds. A minimum tenure for investment in such funds should not be less than 3 years. Further, mid to long-term investors with moderate to aggressive risk appetite may choose to include Thematic Funds as great boosters to their overall investment portfolio. It is highly recommended that such investors keep bringing such timely thematic funds as and when the opportunity comes up to enjoy a truly rewarding wealth creation journey.
How much should invest in Thematic Funds?
Thematic Funds are high risk but high rewards investment propositions. It is advisable to have a suitably proportionate investment in thematic schemes. Ideally, the overall exposure to such sets of funds should be capped at 25% of the total portfolio size for a fruitful and happy investment experience.
