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Specialty Fund

Updated on March 3, 2023

Specialty Fund is a mutual fund which invests in specific stocks, a specific industry, region or a group of such industries. A Specialty or ‘Specialized’ fund focuses on certain specific industries, regions or other market segments. Sector funds, Balanced funds, Asset allocation funds and Thematic funds are some examples of Specialty funds.

What are the uses of Specialty funds?

A Specialty fund has certain uses for investors, like:
1. A Specialty fund is a good investment option for investors who are looking to invest in sectors or themes they understand, have a liking for or are interested in, like banking, pharmaceuticals, chemicals, automobiles, IT, energy or telecommunications.
2. It is ideal for investors looking for exposure to an entire sector or theme and not necessarily in individual stocks.

What should investors know about Specialty funds?

Things to keep in mind wrt Specialty funds
1. A pedigreed fund house and experienced fund manager will be a better option for investing in speciality funds
2. Track record of the speciality fund should be kept in mind
3. Only a certain part of the portfolio should be in speciality funds and that too, in different sectors to reduce the portfolio risk

What are the drawbacks of Specialty funds?

Some limitations of Specialty funds are:
1.The potential for returns is high, but so is the risk
2.They do not provide investors with ample diversification