Such mutual funds invest in stocks that are picked from a single sector or that fit into a particular theme. Suitable for investors who have advanced macro trend knowledge and prefer selective bets for higher returns compared to other equity funds. At the same time, even though the overall market performs better, these investors should also be prepared for the possibility of moderate to high losses in their investments. Sector funds focus on specific sectors or industries such as banking, pharmaceuticals, information technology, real estate, energy, etc. Thematic funds, on the other hand, invest in stocks that are well defined around a particular opportunity. These may look like sector funds but may consist of multiple sectors. You may consider these as being much more inclusive than funding from the sector.