Prajna Capital - An Investment Guide

Thematic funds should be considered only if you have built up a sizeable portfolio and allocated your assets appropriately WHO IS IT MEANT FOR? Strictly speaking, if you’re a first-time investor, then a thematic fund may not be the right kind of product for you. For a first time investor, diversified equity funds should be the first step. Thematic funds are generally seen as more of a product for informed investors. An investor should look at investing in thematic funds only after one has built up a sizeable portfolio and has allocated one’s assets appropriately. What this means is that you should explore thematic funds only after you have an adequate exposure to both small cap and mid-cap stocks and have the capacity to bear a sizeable amount of risk. Even then experts recommend minimal exposure. FALLOUTS At any given time, there is generally one segment in which more interest is shown than others, which then becomes the flavour of the season. Investors immediately begin clamouring fo...

The constraints of managing funds that invest in a select few sectors can often prove to be demanding for fund houses. As a result, it isn't entirely uncommon to find a sector/thematic fund changing/expanding its investment objective/style in due course. This bears testimony to the intrinsic inadequacy of a sector/thematic fund in terms of sustainability over the long-term. Nonetheless sector/thematic funds continue to be launched at regular intervals. Now isn't this dichotomy interesting. Why sector/thematic funds are launched in that sector/theme, there is often more to it than meets the eye. Experience suggests that fund houses find it rather easy to garner monies in new fund offers ( NFOs ) as opposed to existing funds. Maybe, it's something to do with the Rs 10 net asset value ( NAV ) that attracts investors; then again, it could be the result of the higher commission payouts on NFOs vis-a-vis existing funds. In most cases, with the exception of the investor, the NFO w...