Focused Funds and Thematic funds

While focused funds are concentrated on a smaller number of stocks, thematic funds invest in companies that are related to a specific theme or sector. Both types of funds carry higher risk due to their concentrated portfolios and are suitable for investors who have a higher risk appetite.

Focused Funds:

• Focused mutual funds are equity funds that follow a strategy of having a concentrated portfolio.

• These funds cannot have more than 30 stocks in their portfolio by regulation, although there is no limitation on market cap or sectors it can invest.

• Minimum 65% of the corpus in equity shares but not more than 30 unique stocks.

Thematic funds:

• Thematic funds invest in a particular theme, that is, they pick sectors and industries that are tied to an idea.

• These companies can belong to different sectors and capital sizes but can cater to the progress of one idea.

• Minimum 80% of the corpus should be invested in sector or theme specific shares only.

Therefore, both focused funds and thematic funds carry a higher degree of risk compared to diversified equity funds, as the portfolio is concentrated in a limited number of stocks or sectors. Hence, investors should carefully assess their risk profile and investment objectives before investing in these types of funds. It is advisable to consult a financial advisor before investing in mutual funds.