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With mutual funds catering to investors’ diverse financial needs, opportunity funds help you earn higher returns by seeking growth opportunities. This means that the fund manager is always on a lookout for lucrative investment opportunities. 

What are Opportunities Funds?

These are a type of mutual funds where the fund manager follows a dynamic investment strategy by investing the money in high-growth opportunities. For instance, they seek higher growth opportunities in companies based on their capitalisation value:

  • Large-cap companies can offer higher growth opportunities due to their higher market capitalisation

  • Mid-and-small-cap companies have a higher potential to grow due to their relatively smaller capitalisation

 

The fund managers can also look for growth opportunities in different sectors or industries, like:

  • Pharmaceutical

  • Oil and natural Gas

  • Information technology

  • Automobiles

  • Banking and financial services

  • Power or utilities

How Do Opportunities Funds Work?

Opportunities funds are a type of open-ended mutual fund that invests the corpus amount into companies, sectors, and themes with higher opportunities for growth. Hence, the investment mandate of these funds is quite dynamic and flexible, allowing the fund manager to revise the portfolio with changing opportunities. 

 

The primary investment objective of these funds is capital appreciation. However, since an opportunities fund seeks to align with evolving growth rates, it also carries higher investment risk.

Pros of Opportunities Funds

When you invest in these funds, you can enjoy the following benefits:

  • Higher Reward for Risk

Since these funds chase evolving growth rates, they have higher market risks. However, they also carry the potential to provide higher yields. Thus, these are ‘high-risk, high-reward’ investment instruments.

  • Investment Flexibility

These funds follow a flexible investment strategy and do not rely on the market-capitalisation bias. Hence, you can expect the fund managers to opt for the best companies across the market capitalisation sectors.  

  • High Portfolio Turnover Ratio

Fund managers are constantly on the lookout for companies/sectors/ themes providing higher growth opportunities in short-to-medium investment terms. This investment approach significantly increases the portfolio turnover ratio.

Cons of Opportunities Funds

The following are some of the drawbacks that you need to face when investing in these funds:

  • Higher Risks

The primary objective of these funds is capital appreciation, and hence, they seek to invest in sectors or themes that offer higher returns. However, such an investment strategy carries a higher risk of capital loss.  

  • Portfolio Concentration

An opportunity mutual fund generally invests only in 4-5 sectors that are expected to perform well in the future. As such, your portfolio is not as diverse, which can increase the investment risk.

Things to Consider Before Investing in Opportunities Funds

When investing in this fund, consider the following factors:

  • Financial Objective

An essential factor that you must consider when choosing this fund is the financial objective. If your primary goal is capital appreciation, this may be one of the best investment instruments for you.

  • Risk Appetite

These mutual fund schemes carry high investment risk. Thus, you must assess your risk appetite before investing. 

  • Expenses

Another crucial factor to consider is the fund’s expense ratio, as it can significantly impact your yields. To optimise your returns, choose a fund with a lower expense ratio. 

  • Fund Management

Since these funds follow a dynamic investment approach, their performance relies on the expertise and performance of the fund manager. So, evaluate the fund manager’s past performance before you choose the fund.

Who Should Invest in Opportunities Funds?

Opportunity funds are best suited for investors with a higher risk appetite and long-term financial goals. These can include building a corpus for your child’s education, marriage, or your retirement. 

 

In conclusion, the funds can be ideal if you wish to earn higher returns in the long term. You can add opportunity mutual funds to your portfolio mix along with other less-riskier options to balance your investments. On Bajaj Markets, you can browse different types of mutual funds and opt for the best option without any hassles. 

FAQs on Opportunities Fund

What is the ideal investment horizon for an opportunities fund?

The ideal investment tenor for opportunities mutual funds ranges between 3 and 5 years. Hence, it can be a great investment instrument if you want to invest for a medium-to-long term. 

Is an opportunity fund a good investment option?

When it comes to satisfying your long-term financial goals by earning higher returns, these mutual fund schemes are one of the best options. However, they’re comparatively riskier than other mutual fund schemes.

What is the type of return offered by an opportunities mutual fund?

These funds follow a ‘high-risk, high-opportunity’ investment strategy. Hence, you can expect to earn optimal yields with these funds while exposed to higher risk unlike other fund options.

What is the difference between a growth fund and an opportunity fund?

An opportunity fund is a type of mutual fund that invests in companies, sectors, or investments where the fund manager anticipates a higher growth opportunity. On the other hand, growth funds are equity-based mutual funds with an investment objective of capital appreciation and do not provide any dividends.

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