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Sectoral funds invest in the stocks of a particular sector. So technology funds will invest the majority of the funds in technology stocks. As per the SEBI guidelines, a minimum of 80% of the fund assets will be invested in technology stocks.
The objective of these funds is to generate maximum returns by focusing on and investing in the technology sector.
These funds are suitable for high-risk investors. We believe concentration risk is very high in any sectoral funds and the impact of the market cycle can be severe in this category. This category is suitable for informed investors who are bullish on the technology sector. You should have a solid understanding of the sector before you invest in such funds. Also, entry and exit timings matter in sectoral equity funds, so we can not define the ideal time horizon for any particular sectoral fund. You should not allocate more than 10% of your portfolio to any sectoral funds.