Best Sector infrastructure mutual funds are a class of equity funds whose asset allocation is made mostly towards equities of companies operating in the infrastructure sector. We have covered the following in this article on the best sectoral infrastructure funds:
Sectoral infrastructure funds concentrate their portfolio majorly towards equity shares of the companies involved in infrastructure development in the country. These funds are expected to beat the broader benchmarks when the underlying sector and companies are favoured and doing well. Investing in sectoral infrastructure funds gives investors the potential to earn overwhelming returns in the long run. On the flip side, these funds carry a higher risk of concentration due to the nature of their portfolios being concentrated towards equities of the infrastructure sector.
The following table shows the top-performing sectoral infrastructure funds based on the past 5-year and 3-year returns:
Investing in sectoral infrastructure funds is suitable for those looking to diversify their portfolio across companies operating in the infrastructure sector. Since the concentration risk associated with these funds is on the higher side, these funds are apt for aggressive investors. Anyone looking to tap on the potential of the infrastructure sector and benefit from the same may consider investing in sectoral infrastructure funds. Investors should have an investment horizon of longer than five years. This helps in mitigating the associated risks to a greater extent.
Since sector funds are a class of equity funds, infrastructure funds are necessarily taxed like any other equity fund. The dividends offered by the sectoral infrastructure funds are added to your overall income and taxed at the income tax slab rate you fall under. This is known as the classical way of taxing dividends.
Short-term capital gains are realised if you redeem your units within a holding period of one year. These gains are taxed at 15%. Long-term capital gains are realised on selling your fund units after a holding period of one year. These gains of up to Rs 1 lakh a year are made tax-exempt. Any long-term capital gains over Rs 1 lakh a year are taxed at 10%.
Sectoral infrastructure funds come attached with the following risks:
As an investor, you should consider the following before investing in a thematic consumption mutual fund:
Investing in thematic consumption funds comes with the following advantages: