Introduction

Do you ever think of investing in a fund that is important to survive on this earth, like electricity, fuel, or technology? Well, Energy Mutual Funds offer an opportunity to invest in the energy sector, like oil and gas companies or rapidly growing green energy mutual funds. These funds benefit from the growing energy demand driven by industries and economic activities.

In this article, you will learn about the best energy mutual funds benefits and many more.

What are Energy Mutual Funds?

These mutual funds are jointly funded by various investors to invest in companies operating in the business of producing, distributing and constructing energy. These types of funds are professionally operated and invest in a portfolio of securities oriented towards energy, such as stocks, bonds and securities of companies in business to produce, distribute, and construct energy. These funds offer you the SIP option in their schemes so that you can invest a small amount of money periodically.

These funds are of various types lets see what the types of these funds are.

What are the Types of Energy Mutual Funds?

As you learn above there are several types of energy mutual funds lets understand a few of them:

1.Traditional Energy Funds

These investments are predominantly in producers of fossil fuels, including producers of oil, natural gas and coal. Refining and service companies for them may also be included.

2.Renewable Energy Funds

These invest in solar, wind, hydro and biofuel companies and specialize in green and ecological energy. These funds are also known as Green energy mutual funds because of their ideal investment in green and sustainability-minded investors.

3.Hybrid Energy Funds

These investments are in renewable and conventional companies and provide exposure to future energy in an equally weighted manner.

4.Energy Infrastructure Funds

These fund companies in businesses transporting, holding and delivering energy, such as companies in pipelines and utilities.

5.Global Energy Funds

These investments in companies in any geographic location around the globe give geographic diversification.

After knowing about all the types, lets see the merits of these funds.

What are the Benefits of Energy Mutual Funds?

Investing in energy mutual funds presents several benefits. Some of them are:

1.Portfolio Diversification

Energy funds offer portfolio diversification by investing in a vital sector of the economy, hence reducing the risks of investing in individual companies.

2.High Return Potential

As their pattern is cyclic, investing in energy funds is able to provide massive profits in case of price upturns in commodities, profiting from the long-run expansion in the energy sector.

3.Exposure to Innovation

As technology and renewable power advance, energy funds provide access to innovative companies building tomorrow’s green power, keeping them future-oriented.

4.Inflation Hedge

Stocks in the energy sector usually perform better in inflationary conditions, and their price tends to rise in proportion to inflation. Hence, such funds make for a savvy option to retain purchasing power.

5.Professional Fund Management

These Funds are managed by industry professionals who analyze market trends and assess risks and strategic investment decisions to maximize for investors.

Best Energy Mutual Funds for SIP

While you are here, here are some of the best energy mutual funds that you can consider:

1.DSP Natural Resources and New Energy Fund

The fund is unique in having given good returns in the past, investing in renewable and conventional energies. This fund was launched on 25 April 2008 and has an AUM of a total of Rs.1190.43 Cr.

2.Tata Resources & Energy Fund

Another fund to has delivered good historical performance, investing in companies in the energy sector. This fund comes under the Tata mutual fund scheme which was launched on 28 December 2015. The total assets of this company are Rs.1009.28 Cr.

3.ICICI Prudential Energy Opportunities Fund

The fund offers exposure to a range of companies in the energy sector. This fund was launched on 27 July 2024. You can start SIP in this fund also so that you can monitor your money. The total assets of this fund are Rs.9,557 Cr.

4.SBI Energy Opportunities Fund

An equity fund by a prominent fund house, investing in the power sector. This fund is part of India’s largest bank, SBI. This fund was launched on 5 February 2024. The smallest amount of investment you can make is Rs.1000.

5.DSP Global Clean Energy Fund of Fund

The fund is focused on investing in clean energies, and through it, investors have access to the growing renewable sector. This fund was launched on 14 August 2009 and as of now the total assets of this company are Rs.91.54 Cr.

Although knowing the best funds is not the only thing you should consider while investing you should also know if the fund is aligning with your financial goals or not. Lets see the factor of who should consider these funds.

Who Should Invest in Energy Mutual Fund?

The factors you should consider before investing in Energy mutual funds are as follows:

1.Long Term Investors

Long-term appreciation of capital is available for such individuals through Energy Mutual Funds as historically, the industry has proved to increase in the long term. Long-term investors have chances to exploit industry movements driven by expanding energy demands and shifts toward renewable energies.

2.Risk Tolerant Investors

The volatility in the energy market is driven by several factors such as volatility in oil prices, geopolitical events and regulations. Risk tolerant investors who do not feel uncomfortable with market swings may have their focus drawn to energy funds for their capability to offer good returns in favorable market conditions.

3.Sustainability Focused Investors

As renewable energy is becoming increasingly prominent, sustainability oriented investors who want to invest in green and clean power companies have access to options in mutual funds. These sorts of funds provide for ethical investing and sustainability objectives.

4.Diversification Seekers

Investors who want to diversify their portfolio might include funds to offer sector-balancing exposure. In including their holdings in the sector of energy, they might reduce their exposure to dangers stemming from investing in only traditional sectors.

Hence, after learning about all key considerations for investing in this mutual fund let’s move toward the last segment of this article.

Conclusion

In short, these mutual funds are an interesting way to invest in one of the critical components of the global economy. These funds offer investors exposure to growth powered by energy whether that is industries, homes or even technological advances. You can also start SIP in these funds to gradually increase your money if you do not have high capital at the start of the investment. Whether you are looking for a long-term investment, aim to diversify your portfolio or want to invest in renewable energy these mutual funds are an excellent option for you to grow your money.