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What is a Thematic-Dividend Yield Mutual Fund?

6 Mins 22 May 2023 0 COMMENT

A thematic dividend yield mutual fund is a type of mutual fund that invests mainly in stocks of companies that operate in a specific sector or industry, depending on the fund’s theme. Thematic investment entails concentrating on a specific trend or theme, such as technology, healthcare, or renewable energy.

Moreover, these funds provide investors with regular dividend payments from the stocks in their portfolios. Hence, along with capital appreciation, investors also receive a steady stream of income through dividends as these funds invest in companies that have a history of paying out regular dividends and have a high dividend yield.

Advantages of Thematic-Dividend Yield Funds

There are many advantages of thematic dividend yield mutual funds. Below are some of them:

  • Thematic dividend yield mutual fund invests primarily in dividend-paying stocks with a track record of making regular dividend payments. These dividends are distributed to the investors by the fund house.
  • Dividend Yield Funds make investments in businesses that offer security during market turbulence. These funds tend to outperform smallcap, midcap, and growth-oriented funds in bear markets, which benefits investors. High dividend-yielding companies are less volatile in an underperforming equity market, and as the market stabilises, they deliver gains that are in pace with the market.
  • Fund managers also make investments in less risky companies. These businesses do not heavily rely on loan finance. Fund managers are drawn to businesses with high-interest coverage ratios because they are often low-risk.

How to invest in Thematic-Dividend Yield Funds?

Below are the general steps to invest in thematic dividend yield mutual funds in India.

  • First you should select a mutual fund house that provides Thematic-Dividend Yield Funds. Before investing don’t forget to check the track record of your mutual fund house.
  • Complete the KYC process with the fund house before investing. This involves submitting your identity and address proof documents along with a few other details.
  • Open a mutual fund account with the chosen fund house by filling in the necessary application form and submitting it along with the required documents.
  • Select the Thematic-Dividend Yield Fund that you wish to invest in.
  • After selecting the fund, you can invest in it either through the fund house’s website, mobile app or by visiting their nearest branch. You can choose between lumpsum or systematic investment plan (SIP) options depending on your investment amount and preference.
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