3) How

How must you make your selection? We are assuming that if you are considering a sector fund, you already have a base portfolio in place. Once you have the foundation in place, in terms of one or two equity diversified funds, only then consider a sector fund. A sector fund must complement your portfolio, not supplement it.

4) What

What is the fund all about? Is it a sector or thematic fund? A thematic fund is a close cousin of the sector fund. By not limiting itself to a clear and specific identifiable sector, its investment mandate is a theme. So Banking and Pharma are specific sectors, while Real Estate and Infrastructure are themes. One such fund, ING Global Real Estate Retail is grabbing attention with a 30 percent annual return.

Thematic funds have more flexibility in the sense that the interpretation of the theme is left to the fund manager’s discretion, while a sector is more tightly defined. But the principles involved in selecting both are fairly identical.

(The Author is Debanjan Guha Thakurta, Analyst from Fundsupermart.com.)

Also Check Out: 7 Sectors to Attract FDI for India