Equity mutual funds are gaining popularity day by day and equity fund investments are also rising with time.
If you are looking to invest your money and expect higher returns as compare to debt funds or fixed deposits than equity funds can be the perfect option for you.
You might be thinking that why equity funds are so popular and what are the features of equity funds?
Well, funds offer you diversified portfolio, professional management of your funds and most important equity funds offers your much higher returns as compared to other investment platforms.
Equity funds not only offer you various benefits but at the same time equity funds have various types of schemes so that an investor can choose His/Her desired scheme as per its objective or goals.
Equity funds are further categorized in various types, investor has the option to choose equity funds as per His/Her choice.
Types of Equity Mutual Funds
Large-cap funds – In these equity fund schemes, up to 80% of assets are invested in shares of companies with a large market cap.
Large-cap companies are considered to be the most reputed and well-performing companies of all time.
These companies are ranked top 100 companies in the stock market.
Mid-cap funds – In these equity fund schemes, up to 65% of assets are invested in shares of companies with mid-market cap.
These companies are considered to be more volatile in comparison with large-cap companies.
So these companies have the potential to provide more return on investment but at the same time chances of loss are also more because of high volatility.
Small-cap funds – In these equity fund schemes, up to 65% of assets are invested in shares of companies with a small market cap.
Small-cap companies are considered to be the most volatile. And they have the potential to deliver maximum returns if the investment is done after professional recommendations.
Beginners should avoid investing in these companies because chances of loss are also higher because of high volatility.
Multi-cap funds – In these equity mutual fund schemes, assets are usually invested in shares of companies with all three (large, mid and small) market cap.
Since our money is invested in multiple caps and you have a diverse portfolio so it makes your investment more save.
Multi-cap funds also have the potential to provide higher returns with the lowest risks because you have the option to pick up best-performing companies from all three caps.
Top 10 Equity Mutual Funds of 2020
| Fund Name | 1 Yr Return | Fund Size (Cr) |
| Axis Blue Chip Fund | 9.3% | 17,270 |
| ICICI Prudential Sensex Index Fund | 7.1% | 146 |
| Mirae Asset Emerging Bluechip Fund | 14.2% | 11,466 |
| Canara Robeco Equity Tax Saver | 17.3% | 1,181 |
| Quant Active Fund | 21.3% | 66 |
| Axis Midcap fund | 16.4% | 6,732 |
| IIFL Focused Equity Fund | 16.3% | 963 |
| Quant Tax Plan Fund | 26.7% | 17 |
| ICICI Prudential Technology Fund | 50.7% | 692 |
| Nippon India Pharma Fund | 56% | 3,911 |
Advantages
High returns – Equity funds have the potential to provide your high profits on your investment. Because the equity market is dynamic and has high volatility. Your profits can grow at a really faster rate in equity funds in comparison with other investment options such as fixed deposit or debt funds.
Tax saving – There are many equity fund schemes are available with are planned to save tax.
Tax saving plans save your money from and also offer your profits on your investment so tax saving schemes can provide you with dual benefits.
Professional management – When you invest in equity funds your portfolio is always monitored and managed by professional fund managers or brokerage firms, they help you to choose best equity fund plan as per your objectives and they also help you to manage your portfolio better.
Investing and managing these funds on your own can be risky especially of beginners so getting guidance from fund managers can be helpful.
Diverse portfolio – Portfolio diversification is one the key factor to reduce risks of your investment and better higher profits.
These funds enable you to invest in various sectors such as companies from automobile, pharmaceutical or technology sectors which allow you to earn higher profits at the lowest risks.
And also offer investors to invest in shares of companies from the large, mid and small-cap under one scheme.
Who should invest in Equity Funds?
Like other investment options, equity funds investments are done to generate profits but equity funds can generate higher profits in comparison with other investment instruments.
Investors who do not want to expose their money in dynamic or volatile markets should avoid equity funds, conservation investors who want to invest their money in stable yet low-profit instruments should go for fixed deposits or debt funds.
They are well suited for long term investment plans, at the same time equity funds.
Also offers short term high return plans. But the higher risk factor is also associated with highly volatile companies.
Points to keep in mind while investment
Every equity fund investment should be done only after detailed research and professional guidance.
Because equity fund investments are subjected to market risks. So it is always recommended to read the schemes carefully before investment.
You must do your research work or analysis carefully before investing in any equity fund. And do not blindly follow anyone’s advice.
It is also recommended especially for new investors to begin their investments with a small amount of money most possibly with a few thousand rupees. Because it eliminates chances of any major loss.
Investment of small amount allows you to get the experience of the equity market at lowest risk once you gain experience.
Then you can invest a larger amount even you may not require any assistance from fund managers once you gain enough experience.
