Many mutual fund investors are now turning to international and thematic funds after seeing some schemes deliver exceptional returns over the past year, with gains of up to 200%. Technology- and semiconductor-focused funds, particularly those with exposure to Taiwan, have generated strong returns as the global artificial intelligence (AI) boom fuelled demand for chips and advanced technology products.A similar query came from Abhijit, a viewer of The Money Show on ET Now, who is looking to add thematic exposure for diversification. He wants to know whether the Nippon India Taiwan Equity Fund is the right choice for his portfolio.Also Read | Largecap funds lag mid and smallcaps across time horizons. Should investors still allocate for stability? Responding to the query, Pankaj Mathpal, MD of Optima Money Managers, said investors should ideally begin international diversification with broader US-focused equity funds rather than directly investing in highly concentrated thematic funds. “Whenever investors think about global diversification, we generally suggest starting with funds investing in the US economy,” he said.According to Mathpal, interest in the Nippon India Taiwan Equity Fund has increased following its extraordinary performance over the past year. He noted that the scheme primarily invests in Taiwan’s industrial and technology sectors, particularly semiconductor and chip manufacturing companies.“The demand for semiconductors and chips has increased significantly because of the rapid growth in AI-related technologies. That is one of the major reasons why this fund delivered around 200% returns over the last year,” he explained.However, Mathpal cautioned investors against expecting similar returns going forward. “When a fund has already delivered such strong returns, investors should not assume the same performance will continue in the near term,” he said.He also highlighted the sharp volatility the scheme has witnessed since its launch in December 2021. According to him, the fund had declined nearly 21% in its first year. More recently, between April 2 and April 9, 2025, the scheme fell around 21% within a single week.“The fund has seen significant volatility — falling as much as 34% in one year and 21% in just one week. When you invest in sector-specific themes such as technology and industrials, such risks will always remain,” he said.He added that investors should avoid investing in such schemes purely out of fear of missing out. “Investors with larger portfolios may consider allocating a small portion to international thematic exposure. But the decision should not be driven by greed or FOMO after seeing 200% returns,” he said.Also Read | Can a Rs 90 lakh mutual fund portfolio grow to Rs 5 crore in 7 years? Here’s the ideal strategy to consider Mathpal also pointed out that the Nippon India Taiwan Equity Fund is currently not accepting fresh subscriptions. Even if the fund reopens for investments in the future, he advised investors to build exposure gradually through SIPs instead of making a large lump-sum investment.“If someone wants to invest in such a scheme in the future, they should start with a small SIP amount and avoid allocating a significant portion of their portfolio to a narrowly focused sector fund,” he said.(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own and do not represent the views of The Economic Times)If you have any mutual fund-related queries, message ET Mutual Funds on Facebook or X. We will get them answered by our panel of experts. You can also share your questions at ETMFqueries@timesinternet.in, along with your age, risk profile and X handle.