Sectoral funds are Equity Mutual Funds that focus on businesses operating within a specific industry, like technology, healthcare, energy, or financial services or any other sectors. They invest at least 80% of the funds in stocks from that sector, offering potential returns when the sector performs well. However, this investment approach comes with higher risk due to sector concentration. Characteristics of Sectoral Funds  Sectoral funds concentrate on specific sectors, which means they mainly invest in companies within those sectors. This concentration can result in higher returns when the chosen sectors perform well. However, it also brings a higher risk if those sectors underperform. As a result, the returns from these funds can be unpredictable and may fluctuate depending on the performance of the selected sectors.  Advantages of Sectoral Mutual Funds 1.    Diversification within one industry allows you to spread investments across different companies or assets in a specific sector. 2.    Potential for higher returns as these funds focus on well-performing businesses within a particular industry. If you have a strong belief in the prospects of a specific industry and are willing to accept relatively higher risks, Sectoral Funds may be worth considering. Disclaimer Mutual Fund investments are subject to market risks, read all scheme related documents carefully.