Sectoral Fund — Mutual Fund Term Explained

An equity fund investing at least 80% in a single sector — banking, pharma, IT, etc. High concentration risk and cyclical performance.

Sectoral funds concentrate at least 80% of their portfolio in one industry sector. When that sector performs well, these funds deliver outstanding returns; when it underperforms, losses can be severe.

Should be a small satellite allocation (max 5-10% of portfolio).

Related terms

• Thematic Fund — An equity fund focused on a theme across sectors — like ESG, digital transformation, consumption or manufacturing. Higher concentration risk.
• Concentration Risk — Risk from over-exposure to a single stock, sector or theme. High concentration amplifies both gains and losses.
• Equity Fund — A mutual fund investing primarily (≥65%) in stocks. Highest long-term return potential but highest short-term volatility.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.