What is Equity Mutual Fund
It’s a mutual fund scheme that invests in stocks of different companies. They are also known as growth funds. There are two types of mutual fund Active and Passive funds.
In Active fund, a fund manager scans the market, conducts research on companies, examines performance and looks for the best stocks to invest.
In a Passive Fund, the fund manager builds a portfolio that mirrors a popular market index, say Sensex or Nifty.
Why invest in Equity Mutual Fund?
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.
Types of Equity Mutual Fund
Smallcap 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 riskier than midcap or largecap equity funds but can offer the relatively higher returns.
Midcap Equity Funds
These equity mutual fund schemes invest in companies who rank between 101 and 250 by their full market capitalization. These funds are less risky than smallcap funds, but more than largecap funds.
Largecap Equity Funds
These equity mutual fund schemes invest in companies who rank between 1 and 100 in terms of full market capitalization. These funds are the least risky as far as equity fund picking goes.
Large & Midcap Equity Funds
These equity mutual funds equally divide the allocation between largecap and midcap and related instruments and have the potential to offer high returns.
Multicap Equity Funds
Multicap equity funds invest in stocks across largecap, midcap, and smallcap companies. Depending on the market conditions, the fund manager decides the predominant investments.
Some of the advantages and disadvantages are,
Advantages | Disadvantages |
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2. Liquidity | 2. No control |
3. Tax Benefits | 3. Higher Cost |
4. Professional Fund Management | 4. Choice Overload |