Sectoral Mutual Funds

Disadvantages of Investing in Sectoral Mutual Funds

• High Risk and Volatility

  Sectoral mutual funds are inherently more volatile than diversified equity funds. Since they are concentrated in a specific sector, their performance is highly dependent on the fortunes of that sector. Any negative developments or downturns in the sector can lead to significant losses.

• Lack of Diversification

  Investing heavily in a single sector means that the fund's performance is not cushioned by investments in other sectors. This lack of diversification increases the risk as poor performance in the chosen sector can significantly impact the entire investment.

• Sector-Specific Risks

  Each sector has unique risks that can affect its performance. For example, technology funds may suffer due to rapid technological changes, healthcare funds might be impacted by regulatory changes, and energy funds can be influenced by fluctuating commodity prices. These sector-specific risks can lead to underperformance.

• Economic Cycles

  Different sectors perform differently during various phases of economic cycles. Sectoral funds can be highly cyclical, performing well during certain phases and poorly during others. Timing the market to capitalize on these cycles can be challenging and may lead to suboptimal returns if done incorrectly.

• Limited Flexibility

  Once invested in a sectoral fund, investors are locked into that sector unless they decide to sell their holdings. This limited flexibility can be a disadvantage if the investor’s outlook on the sector changes or if better investment opportunities arise in other sectors.

How to Start Investing in Sectoral Mutual Funds with INDmoney

Now that you have understood what Sectoral Mutual Funds are, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.

• Step 1

  Download the INDmoney app and create your free investment account by completing your KYC (Know Your Customer).

• Step 2

  Once your free investment account is ready, you can either search for an Sectoral Mutual Fund or go to the mutual fund section and tap on Sectoral Mutual Fund from Discover All Categories.

• Step 3

  Choose an Sectoral Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, expense ratios, and underlying stocks and sectors.

• Step 4

  You can choose to set up a SIP in an Sectoral Mutual Fund or even invest as a lump sum. Once you are on the individual Sectoral Mutual Fund page, click from the bottom “One-time” for lump sum investment or “SIP” for a systematic investment plan.

• Step 5

  Choose the amount that you want to invest as SIP or Lump Sum.

• Step 6

  Set up payments. If you choose to set up SIP in an Sectoral Mutual Fund, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lump sum (one-time) then you can pay via UPI, net banking, NEFT, or RTGS.