Nitin Ghai
(Certified Mutual Fund Distributor – AMFI Registered)

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Over the past few months, I’ve reviewed several investor portfolios — and one trend stands out:
too many thematic funds.

Business Cycle Funds. Manufacturing Funds. PSU and Defence Funds.
Sometimes 3–4 of them in the same portfolio.

At first glance, that looks “diversified.”
But when you dig deeper — it’s actually duplication of risk, not diversification.

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🎭 The Hype vs The Habit

Thematic funds always come with a strong narrative:

• “India’s manufacturing boom is just starting.”

• “The business cycle is turning upward.”

• “Capex revival will lift industrials.”

And yes — they can perform brilliantly for a few years.
But over a full market cycle, they often fail to sustain leadership.

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📊 What the Data Suggests (Category Averages – Oct 2025)

• Large Cap Funds → ~14% 5-year CAGR, lower volatility

• Flexi Cap Funds → ~15% CAGR, moderate volatility

• Mid Cap Funds → ~17% CAGR, higher volatility

• Small Cap Funds → ~20% CAGR, very high volatility

• Thematic Funds → ~17% 5-year CAGR, but only ~11% over 10 years with the highest volatility

In short:
They outperform briefly, but underperform through full cycles — while carrying small-cap-like risk.

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⚠️ The Hidden Trap — “Multiple Themes, One Bet”

Even if you hold multiple thematic funds, look closely at the top holdings:
L&T, SBI, ICICI Bank, NTPC, HAL — these repeat across themes like infrastructure, manufacturing, and business cycle.

So what looks like four funds…
is actually one concentrated economic bet.

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🧩 What Works Better for Real-World Investors

A balanced portfolio has two layers — a Core and a Satellite.

Core (80–85%)
✅ Large Cap Funds
✅ Flexi Cap Funds
✅ ELSS / Mid Cap Funds

Satellite (15–20%)
🔹 Thematic or Sector Funds (tactical, not permanent)
🔹 Global or Innovation funds (for diversification)

This structure ensures your core compounds quietly,
while your satellite captures opportunities without increasing long-term risk.

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🧠 My Take as an Investor First, Advisor Later

Most investors don’t fail because they pick bad funds.
They fail because they confuse excitement with consistency.

Thematic funds have their place — but not at the core.
Stick to what compounds across cycles:
Large Cap + Flexi Cap + Mid Cap.

“In investing, consistency builds wealth — not cleverness.”

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💬 What’s your view?
Do thematic funds deserve a permanent place in a SIP portfolio —
or should they stay in the 10–15% tactical zone?

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#MutualFunds #PersonalFinance #InvestingWisdom #SIP #FinancialPlanning #WealthBuilding #InvestmentStrategy #LongTermInvesting