123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Investing---Finance >> View Article

Equity Fund Investments – A Detailed Guide

Profile Picture
By Author: Shashank Bhaskar
Total Articles: 63
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

Many novice and seasoned investors rely on mutual fund to generate an additional source of income and create a corpus in the long term. This is one of those rare market investment instruments that suit both, conservative investors with low risk appetites and investors who are not afraid of taking risks. One of the most popular types of mutual fund investments is an equity mutual fund. Here is a detailed guide on this type of mutual fund.

Equity based fund – meaning and definition

Equity fund is a type of mutual fund which aims to generate high returns on investment. The fund manager of an equity-based fund typically invests in shares of different companies of varied market capitalisation. These funds have the potential to produce higher returns than traditional investment instruments; fixed deposits for instance. They can even provide better returns when compared to debt funds, which is another type of mutual fund, ideal for conservative investors. The returns earned from debt-based ...
... fund investments largely depend upon the performance of the company offering the fund.

The working of equity-based funds

Equity linked mutual funds essentially invest a minimum of 60% of assets in equity shares of various companies, in different proportions. This should be as per the investment mandate. The fund manager may invest in purely small-cap, mid-cap or large cap funds or even chose a mixture of different funds to maximise market capitalisation. Also, the investment style of the fund manager could be either growth-oriented or value-oriented.

Allocation of funds

Once the fund manager allocates a significant portion of the equity oriented funds, the remaining amount is used to invest in debt funds and other money market instruments as a portfolio diversification technique. This is done in order to be able to both, honour sudden redemption requests from investors and to mitigate the risks associated with equity investments to a certain extent. Purchase and sales decisions are made by the fund manager in order to make the most of changing market movements as well as to reap maximum, high returns.

Types of equity funds

Equity funds are broadly classified in two categories

Funds based on themes and sectors: These are equity-based funds focusing investments on specific themes and sectors. While thematic funds typically follow a specific theme or subject (for example international stocks or emerging companies), sector funds basically invest in specific industries like Pharma, Technology, FMCG etc. These equity-based funds are comparatively risky because the fund manager has to account for both, market risks as well as sectoral performance. That said, you can easily diversify your investment and maximise market capitalisation by investing in these funds.

Funds based on market capitalisation: Equity savings schemes that invest in funds based on market capitalisation are divided into five categories i.e. large cap, mid-cap, mid and small cap, small cap and multi cap funds. Companies that are well-established and have the ability to provide stable returns on investments are regarded as large cap funds. Mid-sized and mid and small sized funds invest in medium and small sized companies. Small cap funds typically deliver fluctuating returns since small-sized companies are more prone to volatility. A fund that invests across various markets i.e. large, mid and small-cap stocks is referred to a multi-cap fund.

Final word: Investing in equity mutual fund may not be ideal for every investor, but it is not without its benefits. These funds are manged by experts, come with low investment costs and are highly liquid. You can invest in these funds conveniently and even diversify your investment portfolio.

Total Views: 353Word Count: 582See All articles From Author

Add Comment

Investing / Finance Articles

1. Top 5 Loan Secrets For Women Entrepreneurs
Author: Mpower Credcure Team

2. Mastering Currency Trading: Strategies For Profitable Returns
Author: hoardingonrent

3. Unlock The Secrets Of Itin Application: Your Guide To Obtaining An Itin Number For Non-us Citizens
Author: itin.support

4. Simplify Your Itin Application Process And Save With Our New Year Discount
Author: itin.support

5. Paystand Named Winner Of Fintech Breakthrough Award For Defi Innovation
Author: Orson Amiri

6. How To Sell Usdt In Dubai: A Comprehensive Guide
Author: cryptodubaiotc

7. Navigating The European Crypto Landscape: A Guide To Buying Usdt In Europe
Author: cryptoeuropeotc

8. Exploring The Rise Of Usdt Otc In Dubai: A Hub For Crypto Investors
Author: cryptodubaiotc

9. Explorez En Toute Sérénité Avec Un Guide Compétent : Voyage Privé En Inde
Author: Voyage en Inde en 2024

10. Mastering The Art Of Profitable Trading: Strategies And Tips
Author: hoardingonrent

11. Take Profit Order - A Quick Review And How It Works?
Author: Growlonix

12. Federal Interest Rate And Forex Market
Author: Shyamkumar

13. How Does A Loan Against Mutual Funds Help A Financial Emergency?
Author: Abhi

14. Crypto Trading Signals – A Better Opportunity To Trade Like A Pro In 2024
Author: Growlonix

15. How To Check Loans Using A Pan Card
Author: Loanswale

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: