Should I invest in thematic or diversified equity mutual funds

To invest in thematic or diversified equity funds, your investment horizon should ideally be 5 years. You have mentioned the period as 3-5 years but we think you should keep it as 5 years.

Within these two fund categories, thematic funds carry the highest risk as the funds invests primarily in a theme or a sector. As an investor you are not sure when the theme will play out and you will make your returns. The other thing is that Thematic Funds may not outperform the broader markets even if the market is doing well because chances are that even if the market does well the theme of the fund might not play. On the other hand, thematic funds can do well in a subdued market as the theme of the fund might play well and outperform the broader markets.

Therefore, without taking chances and also to keep things simple, you should invest in diversified equity funds while keeping in mind that it carries high risk and the fund can give very good returns if the investment horizon is 5 years minimum.

Birla Sun Life Advantage Fund, SBI Magnum Multi-Cap Fund and Mirae Asset India Opportunities Fund are some of the top performing funds in the diversified equity funds category.

Hope you find our suggestions useful. Thanks for writing to Advisorkhoj.