InvestmentFinancial Glossary
Thematic Fund
Definition
A mutual fund that invests across multiple sectors united by a common theme — such as infrastructure, consumption, ESG, manufacturing, or digital India. Thematic funds are broader than sectoral funds (which invest in a single sector) but narrower than diversified funds.
Why It Matters
Thematic funds carry significant concentration risk because the entire portfolio is tied to a single investment thesis. Infrastructure theme funds soared during the capex cycle of 2023-25 but may underperform when the theme fades. Unless you have strong conviction in a multi-year theme, stick to diversified funds for core holdings.