Equity funds are a type of mutual fund scheme. Equity funds invest in shares/stocks of different companies across various sectors. Your fund’s manager or broker offers you higher returns by investing your money in different companies, Main purpose of equity funds is to provide investors higher profits as compared to term deposits. The risk factor of equity funds always depends on share market conditions as market moves so that your equity fund investment. Equity funds are further divided into various categories.
Types of equity funds
On the basis of market capitalization
Large-cap funds – In this investment scheme, 80% of funds are invested into shares/stocks large-cap companies or blue-chip stocks. These companies are generally top 100 companies of share market with large cap, Their performance is usually very stable and consistent. The companies are less volatile and provide risk-free stable profits.
Mid-cap funds – In this investment scheme, 65% of funds are invested into mid-cap companies, usually these companies are ranked between 101 to 250 in share market.Mid cap companies are usually more volatile as compared to large cap companies so they can provide a higher return in comparison with large cap companies but due to high volatility, a Higher risk is also involved.
Small-cap funds – In this investment scheme, 65% Funds are invested into small-cap Companies. Small-cap companies are ranked between 251 or below because of their small capital size. Small-cap countries are generally very volatile so they can provide much higher profits in comparison with mid and large cap companies. Usually, small-cap companies are less consistent and more risk is also involved in comparison with mid and large cap companies because of much higher volatility.
Multi-cap funds – In this scheme, generally funds are invested into all three caps such as large, medium, and small caps to diversified investment so that investors can get good amount of returns without putting all money on a single cap category. It is up to your fund manager or broker to choose perfect multi-cap investment strategy for you to provide you a higher amount of returns in a multi-cap fund investment scheme.
On the basis of tax saving
Equity Linked Savings Scheme (ELSS) saves tax on equity funds and it provides tax benefits up to Rs 1.5 lakhs. In this investment strategy minimum, 80% of assets are invested into equity and usually, these schemes has lock-in period of 3 years.
On the basis of investment style
Active equity funds – In this strategy fund manager or broker keep a close eye on companies and share market, He/She choose stock after evaluation of various parameters to get good returns on investment.
Benefits of investigating in equity fund schemes
Diversified portfolio – Diversified portfolio is known as one of the best strategy to reduce risks on your investment because your funds are invested into various companies across different sectors such as automobile, real estate, infrastructure and pharmaceuticals etc. Once you have diversified portfolio growth of your investment do not rely on single company.
Tax benefits – There are many investment schemes in equity funds which are focused on tax saving along with providing your good amount of returns on your investment.
Professional management of your funds – Every equity fund scheme is closely monitored by trading firms and professional fund managers, usually they have years of experience to manage investments of their clients, with their experience there are less risk of loss on your investment. It is always risky to invest money in share market without any professional guidance but in equity funds scheme your investments are always under professional monitoring.
Higher profits – Equity mutual funds offers you higher returns on your investments because your money is invested dynamic and volatile markets which your keep growing with time, Once market grow so that your investment but other investment schemes such as fixed deposits provide you stable but very slow and less returns on your investment.
Low investment cost – To begin your investment in equity funds you don’t need any fixed or high amount of money, Equity fund plans are generally open for everybody. Equity fund investment plans offers you wide variety of investment schemes to begin your investments, You can even start your investment in equity funds even with few thousand rupees. Due to low investment cost students and young peoples can invest in these schemes and they can increase their investment with time as they get more experience in equity mutual fund schemes.