Top Rated Focused Funds in 2024 - Best Focused Funds

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Disclaimer: Mutual fund investments carry market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.

About Focused Funds

Focused Funds have a more concentrated portfolio with a small number of carefully chosen stocks as compared to other Mutual Funds schemes. While mutual funds are well-known for providing diversification, the Focused Funds scheme has a more concentrated and focused approach. These funds are alternatively called as “under-diversified funds” or “concentrated funds”. The main characteristics of Focused Funds include:

Focused Mutual Funds intentionally keep their portfolio to a maximum of 30 Stocks, contrary to other equity mutual funds that hold between 50 and 100 stocks.
There is no restriction on the selection of companies in Focused Funds. The fund manager can choose to invest in stocks from companies from different industries and sectors, with a diverse range of market capitalizations.
Focused Funds can result in better profits if the chosen stocks perform well. However, there are also risks associated with it because of the lower number of stocks. A fund manager's skill and judgment play a major role in how a Focus Fund performs.

Focused funds invest as per the theme of the fund. Investing in Focused Funds may offer the following benefits:

Fund managers perform comprehensive research on stocks before investing in a particular sector based on the fund theme. This reduces the effort on your part to select stocks and yet you can earn good returns.
Focused Funds have the option to invest in any market cap. Fund managers have the freedom to invest in large, mid, or small-cap companies as per the fund theme and performance. This flexibility enhances the overall performance of your portfolio.
As Focused Funds are a part of equity funds, they can be a suitable option for your long-term goals. The portfolio may see some ups and downs due to the short-term market volatility, but long-term gains outweigh the downturns.

You need to understand that investing in Focused Funds carries a higher risk and that the selection of companies by fund managers determines the fund's performance. Thus, before investing, carefully consider the fund manager's background, expertise, investment philosophies, and acceptable degree of risk.

Your investment choices and risk tolerance are the two main factors in deciding if Focused Funds are a wise choice. The following factors should be taken into account when deciding whether Focused Funds fit into your investing plan:

As Focused Funds invest in a limited number of stocks, there are high chances of increased volatility. If you are comfortable with market fluctuations and have a high-risk tolerance, then you can go for these funds.
A Focused Fund can be suitable if you are willing to take on more risk and are looking for potentially bigger returns. If you have a low-risk profile, it’s better to avoid these funds.
Focused Funds are a great option if your portfolio is well-diversified and includes stocks and other funds. You might not be able to achieve your long-term goals with Focused Funds alone due to their under-diversification feature.

It's essential to remember that there is no one-size that fits all. Before investing, you should do your homework and understand your financial condition and goals.

Not everyone would prefer to invest in Focused Funds due to their comparatively high risks profile. Here are some considerations to check if Focused Funds are appropriate for you:

Focused Funds may outperform large-cap or index funds in a portfolio. However, you should never forget that higher returns equal greater risks.
You would be able to realize the full potential of Focused Funds only after investing for the long term. If you wish to receive better returns, you need to stick to the longer time frame.
Focused Funds can be ideal if you are an aggressive investor who can withstand market fluctuations. The fund manager makes stock selections with the expectation of earning substantial returns. However, these selections are risky in nature.
When choosing a Focused Fund, you should be prepared to do extensive research or rely on the fund manager's performance record. It is important to understand the manager's approach, the investing strategy, and the logic behind the choice of stocks.

The main purpose of Focused Funds is that the fund manager invests in fewer, high-conviction stocks that they think will beat the market. If these stocks outperform, you can expect decent profits. You can attain your investment goals by conducting proper research and maintaining a long-term outlook.

FAQs

Focused Funds operate by investing in a limited selection of stocks, allowing for a more concentrated investment strategy. The fund managers of these funds conduct thorough research and analysis to pick a small number of stocks (up to 30) they believe have high growth potential. This approach aims to achieve superior returns by investing in what are considered the best opportunities in the market.

Focused Funds can invest across various sectors and market capitalizations, including large, mid, and small-cap companies. The choice of stocks is based on the fund manager's research and conviction, aiming to include only those stocks that are expected to outperform. This means the investments can span diverse industries, offering a mix of stability from large caps and growth potential from mid and small caps.

While Focused Funds aim to maximize returns by investing in high-performing stocks, profits are not guaranteed. These funds have the potential to yield high returns due to their concentrated approach and selection of stocks that fund managers strongly believe in. However, the risks are also higher, and performance can vary significantly based on market conditions and the success of the selected stocks.

No, Focused Funds are not tax-free. The returns from these funds are subject to taxes similar to other equity mutual funds. Long-term capital gains over ₹1 lakh are taxed at 10% without indexation, and short-term capital gains are taxed at 15%.

The taxation of Focused Funds follows the standard equity mutual fund taxation rules in India. Long-term capital gains (LTCG) exceeding ₹1 lakh are taxed at 10%, and short-term capital gains (STCG) are taxed at 15%. It's important to consider these tax implications when calculating potential net returns from your investments.

Selecting the best Focused Fund requires considering several factors such as the fund manager's track record, the fund's performance history, investment strategy, and how well it aligns with your investment goals and risk tolerance. Additionally, looking at the expense ratio and the specific stocks included in the fund's portfolio can help you assess whether a particular fund is likely to meet your investment objectives.

No, you don't need a demat account to invest in Focused Funds. You can directly invest through mutual fund platforms or AMC websites without a demat account. Demat accounts are optional for mutual fund investments.

Choosing between lump sum and SIP in Focused Funds depends on your financial strategy and market outlook. SIP might be a safer bet for spreading out your investment over time, minimizing risk. Lump Sum could be advantageous if you anticipate a market upswing, but it requires more market insight.

To start an Focused Fund SIP online, follow these 4 steps:

Open Demat Account
Choose the Focused Fund you wish to invest in.
Choose the SIP option, specifying the amount and SIP date
Set up an auto-pay via bank account to automate the SIP payments

Yes, you can sell your Focused Fund investments at any time. These funds are typically open-ended, offering the flexibility to redeem units at the current Net Asset Value. However, consider potential exit loads or market conditions to optimize your returns.

Generally, Focused Funds don't have a lock-in period, giving you the freedom to enter and exit according to your investment strategy. This provides flexibility but always check for specific fund conditions or charges that might apply upon exit.

Focused Funds, by concentrating investments in a limited number of stocks, carry higher risk due to potential volatility in those selected investments. The success of these funds is heavily reliant on the performance of a few stocks, making them more susceptible to specific market or sector downturns.

No investment, even Focused Funds, is risk-free. While they offer the potential for high returns due to concentrated investments in carefully selected stocks, they also carry a higher risk level. Your investments are subject to market fluctuations, and there's always the possibility of not achieving the expected returns.

*All securities mentioned on this website are exemplary and not recommendatory.

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