Fund of Funds - Equity Oriented

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Equity Oriented Mutual Funds - A new form of Indirect Investment

Have you ever heard of a fund investing in other funds? Does it sound confusing? Don’t worry, here is the solution to all your confusions. The mutual fund industry has launched a new type of scheme, i.e. Equity Oriented Mutual Funds. Equity Mutual Fund primarily focuses its investment on the equity-based mutual funds. It implies that instead of directly investing in the capital market, Equity Oriented Mutual Fund invests in those mutual funds which have already invested in the capital market. So, it is an indirect investment. Equity Oriented Funds truly justifies its name because a single fund is investing in various other funds.

The concept of Equity Oriented Mutual Fund was initiated to provide greater diversification and increased the sense of security. Investing in variegated schemes which already have finances invested in different equity shares. Thus, Equity Oriented Mutual Fund invests in equity but indirectly. The chief objective of the scheme is to escalate the profit by broader diversification. 

Highlighting features of Equity Oriented Mutual Funds

For attracting the clients to invest in Equity Oriented Mutual Funds, the AMCs (Asset Management Companies) have taken into consideration the following points:

  1. Increased diversification: Investing in Equity Oriented Mutual Funds, your portfolio gains the benefit of diversification. This is how it works. The other equity-based schemes pool the money of the investors and put it in the shares of various listed companies (Large-Cap, Mid-Cap, and Small-Cap) based on the type of scheme it is. These funds put the money in various companies and thus, are called diversified funds. Now, Equity Oriented Mutual Fund puts the pooled money of the investors not in the shares of the listed companies but, in the schemes that have invested in the shares. Equity Oriented Mutual Fund does not target any particular fund. It is a combination of various schemes. For example, if an Equity Oriented Mutual Fund invests in two schemes: one of which is having an investment in 20 Large-Cap companies and the other holds shares of 25 Mid-Cap companies. So, the investment of Equity Oriented Mutual Fund is indirectly in 45 companies (Large-Cap funds and Mid-Cap funds).
  2. Check on the risk factor: Equity Oriented Mutual Funds invests in capital market but not directly. So, it is influenced by the fluctuations of the market but with comparatively less cogency. In a way acting as shock-absorbent, Equity Oriented Mutual Fund saves the investors from being directly exposed to the risk of the capital market. By investing in the schemes registered with SEBI, Equity Oriented Mutual Fund safeguards the investors from needless tautness. The risk factor is lower than the equity-based schemes. For example, if you are directly eating at a Food junction which is unknown to you, then you are putting your health in a riskier situation. But, if you plan to eat at a food joint which is tried and tested by any of your acquaintance then you can rely on it. The risk reduces by manifolds. Same is the case with Equity Oriented Mutual Fund. When your money is invested in schemes which are well-versed with the capital market, then your exposure to the fluctuating market conditions is reduced significantly.
  3. Taxation is not duplicated: A question might be racing in you mind about the taxation policy of the scheme. Investing in Equity Oriented Mutual Fund does not mean that you have to pay the income tax twice as your money is being invested in the equity-based schemes. You have to pay tax only on the money invested in Equity Oriented Mutual Fund and not for the investment which is done by the mutual fund in other schemes (even if they are taxable under the Income Tax Act). 

Thus, the above-stated points must have cleared all your doubts. But, if you have queries regarding Equity Oriented Mutual Fund, then you can consult our experts 24*7. You will get the best guidance because all our expert team are specialists in their field.

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