Focused Fund

Focused Fund – A focused fund is a type of mutual fund that invests in a limited number of securities, usually concentrating on a select group of companies or specific sectors. This approach allows fund managers to focus on high-conviction investments rather than spreading resources thin across a diversified portfolio. Key Features: Typically holds fewer stocks (often 20–30) compared to diversified funds. Investments are based on high conviction in selected companies or sectors. Offers the potential for higher returns due to concentrated exposure, but also carries higher risk. Requires careful research and analysis by fund managers. Advantages: Allows for better monitoring and strategic allocation of investments. Can generate significant gains if the chosen securities perform well. Disadvantages: Increased risk and volatility due to lack of diversification. Poor performance of a few holdings can significantly affect overall returns.

Example: A focused fund investing primarily in technology sector stocks may achieve substantial growth if the sector performs well, but it could also face heavy losses if the sector underperforms.