Focused Funds are funds that invest in a single sector. They are usually created to meet the needs of investors who want to invest in a particular sector but do not have the knowledge or inclination to manage their own portfolios.
Focused Funds are popular in India because of the large number of sectors and sub-sectors that exist within an economy as well as the need for investment options that help investors navigate through complex market conditions.
In many cases, Focused Mutual Funds will have a more limited risk profile than other types of funds because they focus on a single industry or sector. This can make them appealing to investors who want more exposure to growth opportunities while controlling their downside risk at the same time.
Typically, focused equity funds aim to generate returns by investing in companies with similar characteristics. This could mean focusing on companies that operate in the same industry or those that are based in a particular region. They may also invest in companies that have similar business models or use similar technologies.
Top focused equity fund can be suitable for investors who want to invest in a specific sector or industry but don't have the time or expertise to manage their own portfolio. They also allow investors to diversify their investments by spreading them across several different companies instead of just one. Here is a list of best focused funds in 2023:
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Before you invest in a focused fund, it's important to be aware of some of the key factors that can affect your decision.
You should always consider how much risk you're willing to take on when investing. A focused fund is not a good choice for someone who wants to preserve their assets over the long term and withdraw money once they reach retirement age.
Focused funds are great for investors who want to make quick gains in their portfolios but don't want to put in too much time or effort managing them. They're also good choices for people who want to diversify their holdings across different asset classes but don't have time to manage multiple funds at once—and they can help you get started with investing if you haven't done so before now.
A fund’s expense ratio is the number of expenses deducted by its management fees, administrative costs, and other related fees. It is important that you understand how much you will be paying for the services rendered by your chosen fund manager before investing in a focused fund.
Investments made through focused funds are taxed differently than those made through mutual funds. Therefore, it is important that you understand how much tax you will have to pay on your investments made through focused funds before making an investment decision.
Another factor to consider is the manager and fund house behind the focused fund. It's important that they have a good track record of investing in a particular industry or sector so that you know your money will be safe and sound with them.
You also need to look at the fund's risk profile. This means that you need to decide how much risk you are willing to take on your investments, and then choose a fund with an appropriate level of risk for your needs.
While focusing on one sector or industry can limit your risk, it also limits your potential for returns. A diversified fund will allow you to maximize returns by investing in different sectors and industries with less exposure to each individual company within that sector or industry.
Investing in a focused fund means paying higher fees and expenses than investing in a diversified fund. These fees and expenses could eat into any profit made from an increase in stock price over time.
Axis Focused 25 Fund is an Open-ended Flexi Cap Equity scheme launched on 29-Jun-2012 by the Axis Mutual Fund House. This fund has successfully beaten its benchmark over a period of time and its current asset value stands at Rs 38.2700. Also, it has a decent AUM which reflects that the fund has the potential to grow, going forward.
The Sundaram Focused Fund - Direct Plan is an open-ended Flexi cap equity scheme launched by the Sundaram Mutual Fund House on Jan 02, 2013. This fund is accessible to all retail investors as the SIP can be started with an amount as low as INR 250 per month. The fund size is small (888 crores) and therefore there is huge potential for growth going forward.
The portfolio for SBI Focused Equity Fund has been able to beat the benchmark by sticking to its investment objective and making full use of the opportunities available for growth.
Apart from putting money in top names such as HDFC Bank Ltd., SBI, Bajaj Finance Ltd., P&G, Divi’s Laboratories Ltd., etc, the fund managers have also put in money in Alphabet Inc Class A (a global company listed in the USA) and other bets such as Hatsun Agro Products and Solar Industries Ltd. (under the Emergent category).
Quant Focused Fund - Direct Plan is an open-ended large cap equity scheme under the fund house Quant Mutual Fund House launched on Jan 01, 2013. The objective of the fund is to provide capital appreciation by investing in the focused portfolio of blue-chip companies.
The Motilal Oswal Focused 25 Fund - Direct Plan is an open-ended large cap equity scheme launched under the Motilal Oswal Mutual Fund House on May 13, 2013. This fund has one of the lowest expense ratios (0.91%) in the equity-focused category. The AUM of the fund is decent at 1049 crores which points to the amount of growth that can be expected in the future.
The Aditya Birla Sun Life Focused Equity Fund - Direct Plan is an open-ended large cap equity scheme under Birla Sun Life Mutual Fund House on Jan 01, 2013.
This fund is managed by Mr. Mahesh Patil, co-CIO of Aditya Birla Sun Life AMC. He is one of the most recognized names in the industry and therefore the fund has delivered handsome returns. Not just this, the fund also has a very low expense ratio of 1.12% and the beta of the fund (0.90) is less compared to the benchmark.
The above-mentioned funds are some of the best performing focused funds in India in the year 2023. Investors can plan their equity investments on the basis of the above recommendations of the top-performing funds. This way they can get high returns and a diversified portfolio from the top performers.
But at the same time, if the purpose of investors is to achieve long-term wealth then they must understand that this can be done only if they invest in the right sector keeping in mind the cyclical nature of markets.
Disclaimer: The views expressed in this post are that of the author and not those of Groww.
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Research Analyst - Bavadharini KS