Sectoral funds are mutual fund schemes that invest in a specific sector or industry, such as technology, healthcare, banking, infrastructure etc. These funds are considered high risk and high reward because their performance is closely tied to the performance of a particular sector. Returns from sectoral funds can be exceptionally high during sector booms, but they may also underperform or remain negative for extended periods during downturns. Factors like geopolitical events and industry-specific challenges can significantly impact these funds. Sectoral funds are best suited for experienced investors, High-net-worth individuals (HNIs) looking to diversify their portfolio, and investors who already have a well-diversified core portfolio that meets their basic wealth creation needs. Investment in sectoral funds should be over and above your core portfolio as a small percentage of your total portfolio. Investors who are new to investing are generally advised to avoid sectoral funds, as prolonged low or negative returns can be discouraging in their investment journey.