Equity
Funds and equity schemes
are mutual funds that invest in stocks and can be managed either actively or
passively; however one chooses to. These funds are also known as 'stock funds' and are categorised in accordance to the style of investment holdings in the
portfolio and the company size.
These stock funds can be domestic or
international and their size is determined by the company's market
capitalisation. The investment style that is reflected in the fund's holding is
made use of in order to categorise equity mutual funds.
There are various types of equity funds
and each of them differs from one another. Therefore, depending upon the investment
objectives, you can classify the types of equity
funds and equity schemes in the
following ways:
Large-cap
Equity Funds
These equity funds invest the maximum
portion in companies that possess a large market capitalization; hence, known
as large-cap funds. This equity fund is renowned to offer stability and
sustainable returns over a certain period of time.
Mid-cap
Equity Funds
These types of equity fund invest in
stocks of companies that are medium-sized, also known as developing companies.
Similarly equity funds that believe in investing in stocks of smaller companies
are known as small-cap equity funds.
Thematic
Equity Funds
These equity funds are meant to be
invested in securities of sectors such as pharmaceutical or IT. The performance
of each of these schemes depends upon how well each of these industries is
doing in the market. These funds promise you higher returns but at higher
risks.
Multi-cap
funds
These forms of equity funds and schemes invest into different sectors in order to
reduce the risks associated with investments. Also known as diversification of
investment, this process helps if some sectors are affected negatively in the
market. This process is quite necessary in order to reduce the risk factor
associated with investments.
Equity
Linked Savings Scheme
This form of an equity scheme provides
you with tax savings where you have the option of locking your funds for a
period of three years.
Therefore, if you wish to
invest in equity funds and schemes,
then you should know that they come with a higher risk but you have a chance to
earn better returns.
