We often hear that diversified mutual funds are the best for long term investments but the experience of the last 1 decade shows that sector and themed funds have also performed well. Small and midcap funds have also performed well on the return front.
Equity funds that focus on the technology sector have topped the list for the last 10 years. According to data from Value Research, these funds have given 19.7 per cent returns in the last 10 years. The rally in IT stocks is attributed to the increasing focus of companies on digital transformation and innovation.
Smallcap funds come second in this list with an annualized return of 17.8 per cent in the last 10 years. The big credit for this goes to the strong rally in the smallcap sector from the March 2020 lows. There have been many small cap funds that have given returns of 100% or more in the last 16 months.
Midcap funds have also not lagged far behind smallcap funds. They too have given an annual return of 17.2 per cent in the last 10 years. They have benefited from the rally in broader market after March 2020.
Funds that invest exclusively in pharma stocks such as hospitals, diagnostic labs and pharmaceutical companies have given annual returns of 16.7 per cent in the last 10 years.
Pharma stocks have been in the limelight for almost a year and a half since the onslaught of the Corona epidemic and they are seeing a steady rise after the slowdown of the last few years.
Funds focused on listed MNC stocks in India have given annual returns of 15.6 per cent in the last 10 years but have seen a deteriorating performance over the past few years. Their high valuations and the availability of their indigenous alternatives in the domestic market have eroded their sheen.
Investors should note that the funds included in this analysis do not necessarily repeat their return history. This is not investment advice of any kind. Keep in mind that there is risk associated with theme and sector based funds. Choose funds according to your risk appetite and goals. If you are not able to take investment decision on your own, then consult a certified expert or advisor.
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