Focused Mutual Funds

If you are an investor who prefers a concentrated investment approach, then focussed mutual funds may be your first choice. Focussed mutual funds make investment in selected stocks rather than investing in large numbers of stocks. With this approach, fund managers can focus on the companies having strong growth potential and build a high-conviction portfolio.

What are Focussed Mutual Funds?

The focussed mutual funds are those equity mutual funds that invest in a total of 30 companies across various industries and market capitalisation. The fund manager selects the stocks based on the company’s performance, future growth, financial stability, etc.

In contrast to the diversified equity funds, which invest money in many firms, the focussed funds choose a more concentrated approach of investment. Due to having a few stocks, it is possible that the performance of each stock might affect the return on investment for the fund.

Features of Focussed Mutual Funds

• Limited Number of Stocks: The investment in limited stocks helps fund managers make a decision about those stocks they think will perform well in the future.
• Experienced Management Team: Experienced fund managers conduct research, choose stocks, and manage the portfolios effectively.
• Long Term Wealth Creation: Focused funds intend to help investors build wealth over the long term through quality stocks.
• Equity Investments: Focused mutual funds consist of stocks only, helping investors benefit from the stock markets.
• Investment Flexibility: There is an option to invest either in SIP or lump sum basis according to one's financial situation.

How to Invest in Focussed Mutual Funds?

You can invest in focussed funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose a suitable focussed fund.

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Why to Invest in Focussed Mutual Funds?

• High return potential: Due to fewer stock holdings, any high-performance company can contribute towards increased returns.
• Good quality stock picks: Fund managers focus on companies with strong fundamentals and growth opportunities.
• Good for long-term wealth creation: These funds are ideal for investors aiming at long-term investment horizons.
• Sector diversification: Although the number of stocks is limited, investments are usually spread across different industries to manage risk.

Taxation Rules for Focussed Mutual Funds

Focussed mutual funds fall into the category of equity mutual funds as they invest in companies across market capitalisation. Hence, focussed funds are subject to the laws for equity mutual fund taxation.

• Short-Term Capital Gains (STCG): If units are sold within 12 months from the date of purchase, the profits will be considered STCG, which shall be taxed at 20%, with applicable surcharge and cess.
• Long-Term Capital Gains (LTCG): Profits made from selling units after 12 months will be considered LTCG. Profits made from these funds beyond ₹1.25 lakh in a fiscal year will be taxed at 12.5%, whereas LTCG up to ₹1.25 lakh is tax-exempt.