EQUITY FUND

Investment In Mutual Fund Over The Long Term Can Create Wealth For You. However, It Is Not Easy To Choose The Right Mutual Fund. Don't Worry, Our Expert Advice Can Help You Choose The Best & Suitable Mutual Fund For You To Achieve Your Financial Goals..

WHAT ARE EQUITY MUTUAL FUNDS?

An equity mutual fund invests largely in the stocks of various companies to generate returns. Equity fund investments are linked to higher risk as compared to other types of mutual funds. Moreover, equity funds are not one size fits all. There are a variety of equity funds classified by their investment objective that needs to be mapped to your risk profile.

HOW DO EQUITY FUNDS WORK?

Equity mutual funds invest a major corpus in equity shares of various companies in particular proportions. This asset allocation is based on the type of equity fund and its alignment with the investment objective. Depending on the market conditions, the asset allocation can be made purely in stocks of small-cap, mid-cap, or large-cap companies. After allocating a significant proportion to the equity segment, the remaining amount is invested in debt and other money market instruments. This helps bring down the element of risk and take care of sudden redemption requests.

WHO SHOULD INVEST IN EQUITY MUTUAL FUNDS?

Your decision to invest in mutual funds must be in sync with your investment horizon, risk profile, and other objectives. The same is the case for equity fund investments. If you have a long-term goal, it is advised to invest in equity funds. It will provide your funds the much-needed time to combat market movements and fluctuations.

WHAT ARE THE TYPES OF EQUITY MUTUAL FUNDS?

Equity mutual funds can be differentiated based on:

Based on Investment Objective:

Though the objective of all equity funds is generally capital appreciation, it is the risk taken to achieve this objective that varies. This further depends upon the types of stocks that the fund invests in. Some types of equity mutual funds based on their investment objective are:

Small-cap Equity Funds

These equity mutual fund schemes invest in companies that rank above 250 in terms of their full market capitalization (as per SEBI guidelines). These funds are considered to be riskier than mid- or large-cap equity funds but can offer relatively higher returns. Their minimum exposure to such stocks is 65% of the total assets.

Mid-cap Equity Funds

These equity mutual fund schemes invest in companies that rank between 101 and 250 by their full market capitalization. These funds are considered to be less risky than small-cap funds, but more than large-cap funds. Their minimum exposure to such stocks is 65% of the total assets.

F.A.Q

WHAT IS EQUITY MUTUAL FUNDS

Right since its inception, Mutual Funds have evolved into a preferred investment tool for many investors. However, choosing the right Mutual Fund scheme can be a difficult task due to the wide array of options available. Investment requires a careful and well-thought approach to avoid potential losses. Hence, it is imperative to understand the basics of the different types of schemes available to you. Here, we will explore Equity Mutual Funds and talk about the different types of equity funds along with their benefits and a lot more.
WHAT ARE EQUITY FUNDS?

As the name suggests, Equity Funds invest in the shares of different companies. The fund manager tries to offer great returns by spreading his investment across companies from different sectors or with varying market capitalizations. Typically, equity funds are known to generate better returns than term deposits or debt-based funds. There is an amount of risk associated with these funds since their performance depends on various market conditions.
TYPES OF EQUITY MUTUAL FUNDS?

Large-Cap Funds – typically invest a minimum of 80% of their total assets in equity shares of large-cap companies (the top 100). These schemes are considered to be more stable than the mid-cap or small-cap focused funds. Mid-Cap Funds – which usually invest around 65% of their total assets in equity shares of mid-cap companies (101-250th placed companies according to market capitalization). These schemes tend to offer better returns than the large-cap schemes but are also more volatile than them. Small-Cap Funds – typically invest around 65% of their total assets in equity shares of small-cap companies (251st and below placed companies according to market capitalization). This is a huge list and more than 95% of all companies in India fall into this category. These schemes tend to offer great returns than the large-cap and mid-cap schemes but are also highly volatile. Multi-Cap Funds – which usually invest around 65% of their total assets in equity shares of large-cap, mid-cap, and small-cap companies in varying proportions. In these schemes, the fund manager keeps rebalancing the portfolio to match the market and economic conditions as well as the investment objective of the scheme. Large and Mid-Cap Funds – which usually invest around 35% of their total assets in equity shares of mid-cap companies and 35% in large-cap companies. These schemes offer a great blend of lower volatility and better returns.
TAX TREATMENT–BASED CATEGORIZATION

Equity Linked Savings Scheme (ELSS) – ELSS Funds is the only equity scheme that offers tax benefits of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. These schemes invest a minimum of 80% of their total assets in equity and equity-related instruments. Further, these schemes have a lock-in period of 3 years. Non-Tax Saving Equity Funds – Except ELSS, all other Equity Funds are non-tax saving schemes. This means that the returns are subject to capital gains tax.