Aug 10, 2016 4 min read

Equity Funds: Highly Volatile Still Provide Maximum Returns

Under the various asset classes, the equity funds hold the most important position. To know well what they are, read this blog.
Are you confused in making a mutual fund investment? Do you want to know which fund is the most suitable for you? If yes, then read further to know the answer.

The most important point of consideration while choosing a fund for investment is the volatility. The funds which are more prone to market volatility are hardly accepted by the investors. But, we must remember one thing that, “Risk is directly related to profits.” And this is the basis on which the equity funds are designed.

The equity funds are highly prone to market risk, but this is also a fact that they offer the maximum returns to the investors. Everything comes in life at the right moment only; we must have patience. In the case of investment as well, if we maintain some patience; we can reach a great height of success and create a corpus.

The equity fund is the class of assets under mutual fund programme, which principally invests in the stocks of the companies and thus also called the stock funds. A large amount of money from various investors is accumulated and put into equity-oriented schemes. They assure growth of the funds in the long run and also provide capital appreciation.

The major rule on the basis of which the mutual funds work is the diversification, which differentiates the same from other investment tools. The equity funds also focus on the same principal and put the monies into diversified sections of the society.

The equity funds are categorised into different classes on the basis of the following heads:

1.Market Capitalisation of the Companies: It consists three main heads viz.:
Large Cap Funds - Some of the main funds under this class are:

  • ICICI Prudential Focused Bluechip Equity Fund (G)
  • SBI Bluechip Fund (G)
  • TATA Pure Equity Fund (G)
  • UTI Mastershare (G)

Small Cap Funds - Some of the top-performing schemes of this class are:

  • Reliance Small Cap Fund (G)
  • Kotak Emerging Equity Scheme (G)
  • L&T Midcap Fund (G)
  • Canara Robeco Emerging Equities (G)

Mid Cap Funds - The list of some top-performing schemes of this class is as under:

  • SBI Magnum Global Fund (G)
  • TATA Mid Cap Growth Fund (G)
  • Birla Sun Life Mid Cap Fund (G)
  • Franklin India Prima Fund (G)

2.Region or Market Coverage: In this class, the following heads are included on the basis of their global presence:
Domestic Funds: These include the funds which are designed specifically for the Indian citizens.

International: Under this class, the schemes which are having a global market presence are included.

3.Sector Specific: This includes the schemes which specifically invest in some particular sector of the society such as banking, health care, commodities, real estate, IT, etc. Some examples of the schemes falling under this head are:

  • Religare Invesco Banking Fund- Retail (G)
  • SBI Pharma Fund (G)
  • ICICI Prudential Technology Fund (G)
  • SBI IT Fund (G)

4.Equity Linked Savings Schemes: The schemes under this class are focused on saving taxes of the investors by providing exemptions under section 80C of Income Tax Act. Some of the schemes falling under this class are:

  • Religare Invesco AGILE Tax Fund (G)
  • Religare Invesco Tax Plan (G)
  • Axis Long Term Equity Fund (G)
  • Birla Sun Life Tax Plan (G)

Thus, the equity funds have a wide range of investment schemes which are designed to fulfil the desires of the investors. By putting the monies into these funds, they make a wide diversification which assure minimized risks and maximised profits. What they ask for is the patience for a long period, and when they come to producing the results, it offers great wealth.

Before making an investment in the equity funds, the following points require due care:

  1. Time Horizon: It is beneficial specifically for those investors who can put money for a long span of time.
  2. Portfolio Construction: Make sure that the portfolio is designed by adding varied schemes of the same equity class. For example, some schemes are from the large cap funds and some are from the sector specific.
  3. Active or Passive: The schemes are either managed by the fund managers(actively managed) or are based on the market index only(passively managed). This is all up to the investor in which schemes she/he wants to put the money.

So, we must take all the crucial things into due consideration so as to make the best investment decision.

If you desire to put the money into the equity funds, you can avail the services of MySIPonline which has a great range of schemes that fall under the equity class and also offers counseling facilities to the investors.