Sep 26, 2017 4 min read

‘Equity Mutual Fund’ - The Showstopper of The Investment World

Planning to invest in Mutual Funds in India? Go through the types of Equity Fund and choose the one which suits you best.
A market that neither sell clothes nor sell vegetables can better be called as an Equity market. Well, that was an attempt to be humorous. Call it as stock market or share market, this wealth market does justice to its name as it deals in buying and selling of shares and stocks.

The Equity market is the core reason for the birth of Equity mutual funds. The most promising and most rewarding fund of all, ‘Equity fund’ has always captured the heart of all good investment portfolios. What makes it important is a mechanism involved in the creation of equity capital of big business houses. As giant businesses are involved in the choice of Equity Mutual funds it becomes a complexed process.

As it is a Byzantine process and also not a lay man’s cup of tea to understand the market easily. So what comes here to help you out are mutual fund houses. Mutual funds are managed by the professional fund managers, whose core job is to track the markets and manage investments. Well trained and knowledgeable fund managers keep a proper track of the performance of funds, which makes it a profitable venture to invest in.

Hero of the house ‘Equity Mutual fund’

When specifically talking about the equity funds, it is a type of mutual fund that invests mainly in stocks. It can be managed actively or passively. Equity mutual funds are cataloged according to company size and the investment style of the holdings in the portfolio. When talking in terms of rewards this type of mutual fund is most rewarding of all mutual funds. As an equity market is held with big business houses, equity fund becomes the hero of the wealth creation market. The fund calls for investors who have got the high tolerance level for short term investments, but it promises really good returns for the long term. As the market is full of fluctuations, patience is the key to rule over.

Equity mutual fund can further be categorized as:

  1. Large cap fund : The funds which invest a large percentage of their corpus in companies holding large market capitalization are called as large cap funds. These companies are the old and entrenched players with a proper track record as they have slowly and steadily generated wealth for their investors. With strong corporate governance this becomes the most reliable and strong fund for safe players. 
    Suits well for : Large cap funds are the best for beginners. The new steps looking for stability and returns can opt for this fund.
  2. Mid- or small-cap funds : Funds which invest a large percentage of their corpus in companies with small or medium market capitalization are called as mid or small cap funds. The new endeavors always welcome more hope, these funds always have a better scope of growth and returns. This fund welcomes investors with high risk appetite with long-term investment plans. 
    Suits well for : Small and Mid-cap funds are best suited for an experienced investor. With proper monitoring and expert advice this fund can be opted for better results.
  3. Multi-cap funds : Multi-cap funds or better termed as diversified funds follow the rule of multiple investments. Multiple funds basically invest in both the small and large companies along with other sectors. This fund diversifies the money of the investor in appropriate ratios. This is the smart fund to choose as it spreads the risk into different funds, for investors looking for high returns with low risk. 
    Suits well for : Multi cap fund best suits for investors who want to spread their risks and in return require stable returns.
  4. ELSS : Equity Linked Savings Scheme help you save your tax, under section (u/s) 80C of the Indian Income Tax Act. It is diversified equity mutual fund that gives the investor the dual benefit of tax savings with the growth potential of equities. With the lock-in period of 3 years this is a most promising scheme to invest in. 
    Suits well for : ELSS is best suited for people willing to save taxes along with it looking for high returns. Also, investors looking for longer horizons should opt for it as the minimum lock in period is 3yrs.
  5. Sector fund : What makes it tricky to handle is the right choice of entering and exit from the market. As the name suggests sector funds invest in different sectors. Sectors are considered as cyclical or defensive in nature. Pharmacy, Banking, IT, or Metal can be quoted as examples for the same. As it is a critical sector to own returns, it calls for active investors. Risk is naturally high as the returns fluctuate from sector to sector. 
    Suits well for : Sector funds are best suited for investors with aggressive aptitude. Investors having a right investment temperament with good risk appetite should opt for the same.

Everyone’s fund: Equity fund - The great feature of equity funds is the multiple funds available. In the sky of mutual fund, equity funds have the most number of stars.”