The Various Types of Equity Funds

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.