Sector - Healthcare Mutual Funds

The Healthcare sector is considered among the most critical sectors in any economy. Due to factors such as increasing populations, technological advancements, and increased importance of the healthcare industry, companies in this industry will keep having continued growth potential. Investment in healthcare mutual funds enables one to invest in healthcare companies in one fund through a diverse portfolio.

What are Healthcare Mutual Funds?

Healthcare mutual funds refer to sector-specific mutual funds where significant investment is done in those companies that are occupied in healthcare and pharmaceuticals space. They can involve investments in companies like pharmaceuticals, hospitals, diagnostic centers, biotechnology companies, healthcare equipment providers, healthcare services providers, and healthcare technologies.

Since these funds make investments in one particular sector, their performance is heavily dependent on the development of the sector only.

Features of Healthcare Mutual Funds

• Investment in Healthcare Sectors: A healthcare mutual fund is focused on making investments in healthcare companies involved in sectors such as health, pharma, bio-tech, and medicine.
• Professionally Managed: Professional fund managers make investment decisions after analyzing market trends and the prospects of growth in healthcare companies.
• Wide Exposure to Several Companies: As opposed to concentrating all investments in healthcare in one company, the investor will get exposure to many companies within the healthcare sector.
• Growth Prospects: There are high chances of growth in the healthcare industry due to increased expenditures on health, growing elderly population, innovation, and demand for better health services.
• Increased Risks and Returns: Since sectoral mutual funds are concentrated on a particular sector, they can be more volatile than diversified equity funds but provide higher gains.

How to Invest in Healthcare Mutual Funds?

You can invest in healthcare 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 healthcare 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 Invest in Healthcare Mutual Funds?

• Increasing Demand for Healthcare: As an essential service irrespective of the economy's health, the healthcare industry is a reliable one in the long run.
• Reap Benefits of Medical Innovations: Medical innovations such as advancements in biotech, pharma, diagnostic techniques, and healthcare technology present investment opportunities in the sector.
• Diversification of Investment Portfolio: Healthcare mutual funds allow investors to diversify their portfolio with respect to an industry-specific portfolio.
• Building Wealth Through Healthcare Investments: The healthcare industry has offered immense potential through innovation, demographic trends, and rising awareness about healthcare.

Taxation Rules for Healthcare Mutual Funds

The healthcare mutual funds comes under equity mutual fund category as they invest mainly in shares of listed companies in healthcare sector:

• Short-Term Capital Gains (STCG): If the mutual fund units are sold within 12 months from the date of purchase, the profits will be taxed at 20%, with applicable surcharge and cess.
• Long-Term Capital Gains (LTCG): Profits made from selling units after 12 months on gains beyond ₹1.25 lakh in a fiscal year will be taxed at 12.5%, whereas LTCG up to ₹1.25 lakh is tax-exempt.
• Dividend Income: The dividend received will be taxed as per the slab rate.