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Why Should One Invest in Thematic Fund?

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Investors usually hesitate to invest in sector funds and thematic funds because they didn’t want to bear the risk. Sector funds invest in companies associated with any particular business. On the other hand, thematic funds invest in companies or industries based on a specific theme but they’re higher prone to risk profile than sector funds. These funds are well suited to those investors who’ve high-risk profile and can bear a risk of 10-12% of their investment. Therefore, retail investors can’t take the risk of investing in thematic funds because of their low risk taking ability. For those investors, who want to invest in thematic funds, the healthcare is an appropriate sector where they can securely invest for a long-term horizon.

Investing in the pharmaceutical sector is a good decision for investors looking for long-term financial planning. These funds have a good impact on investor’s life. Also, it is quite easy for a fund manager to manage the funds of investor’s portfolio invested in pharmaceutical or overall healthcare sector. Thematic funds are broad-based funds and are a good option for long-term investment. Thematic funds are usually preferred by those investors who have a slightly high time horizon for investing their savings.

For investors, ICICI Prudential launched a new fund offer under Thematic Fund category i.e. NFO “ICICI Prudential P.H.D Fund” where investors will definitely get extraordinary returns with investment in the healthcare sector.

Benefits of Investing in Thematic Funds

Investment in thematic funds like ICICI Prudential P.H.D funds will be a smart approach to build strong financial wealth and attain financial stability. Thematic funds do have high-growth potential and they tend to increase substantially in terms of pricing with the increase in demand for a product. Therefore, if you notice a continuous hike in demand of a particular fund in healthcare sector then definitely your investment decision for such thematic fund will be a right one.

When investors pick a broad base theme like pharma sector for investing their savings, he or she goes through a secular run by becoming a part of a strategic allocation. It may happen the returns at pharma sectors appear negative at the end of 1 or 2 years but they offer surprisingly highest returns after the completion of long-term tenure usually 10 years. The fundamentals of these funds are very intact, and if it continuously plays out in a negative side for 3 years then don’t get panic about it because it will definitely become a powerful theme for the investors when the fluctuations will over due to its cyclic nature.

Click here to see the past performance of top Equity Pharma Funds

Risks Involved in Thematic Funds

As mentioned earlier, investment in thematic funds is a risky and challenging decision for some investors because of lack of diversification in holdings. But these funds are somehow better than sector funds in terms of diversification as they’re more diverse than sector funds and are dependent completely on a specific theme.

Things to Remember Before Investing in Thematic Funds

Following are the major points which you as an investor must keep I mind before investing in thematic or sector funds:

  • You should own a diversified portfolio having regular funds because of their risky and volatile nature of the market. Ideally, investment of above 10% in thematic funds is a risk factor for investors with a high-risk profile.

  • Before investing your money in these funds, you should gain in-depth knowledge of these funds because you may have to take some instant decision regarding allocation of funds in an appropriate sector with changing market conditions.

  • As a serious investor, you must have to focus on upcoming opportunities for that theme or sector rather than worrying about the past returns because these funds are cyclic in nature and deliver the highest return not initially but later after facing cyclic circumstances.

Conclusion

Sector and thematic funds are great modes building a strong financial portfolio. As an investor, you only need to have the patience to attain a long-term perspective after several cyclic fluctuations. Role of your fund manager is very important in the allocation of funds in appropriate sectors in these thematic funds. It is therefore recommended to hire a professional fund manager because he can judge the best timing of the investment for you after understanding your financial objective. Your financial advisor will also carefully administer the exit timing of funds to ensure highest returns for you after the completion of the investment horizon.

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Mr. Ajay Kumar Jain, M.Sc, Chairman And Managing Director
Being the Chairman And Managing Director, he focuses on holistic investment planning and wealth management and tries to make investment planning simpler for retail and HNI investors. Investor education is one of the prime things that Mr. Ajay Jain focuses on as he believes financial education is the foundation of successful investing. With over two decades of experience, Mr. Jain has made a mark in the Indian mutual fund industry due to his compassion and sheer hard work.

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