Sectoral / Thematic Mutual Funds

What are the features of sectoral/thematic funds?

• Limited diversification as the portfolio is invested in a particular kind of sector or theme

• An actively-managed equity mutual funds

• High risk-return trade-off

• Suitable for investors with a long-term investment horizon and a high risk appetite

• Invest through SIPs or lump sum

• Earn tax-free returns up to ₹1 lakh if you stay invested

What are some of the popular sectors of themes?

What should be the investment horizon for sectoral/thematic funds?

• A particular sector/theme might not yield immediate or instant returns

• Moreover, there’s always a risk of short-term volatility

• As such, a long-term investment horizon is suitable

• You can invest for 5 years or more for attractive returns

• You also get a tax benefit on staying invested for a longer tenure

What is the tax implication of sectoral/thematic funds?

• Returns up to ₹1 lakh are tax-free if you stay invested for 12 or more months

• Returns exceeding ₹1 lakh are taxed at 10%

• For redemption within 12 months, returns are taxed at 15%

• Dividends earned, if any, are taxed at your income tax slab rate

What are the payout options?

• Dividend option

  Earn dividends on your investment at regular intervals

• Growth option

  Accumulate the returns over the investment tenure and get a lump sum amount on redemption