An equity fund is a mutual fund which can be open-ended or close-ended that basically invests in stocks. Equity funds are also called by stock funds. That’s why equity has more risk than debt fund.
Benefits of Equity Mutual Fund
The most exciting benefits for investing in equity mutual fund is you don’t have to worry about stock choosing or sectors to invest in. But if you directly invest in stocks you need to do the digging part by yourself for that you need so much knowledge and you need to study for long but people don’t have so much time.
Experienced fund managers manage these funds so they are spending their precious time to follow the market and what is going on the economy? Which company has the potentiality to grow in future?
As we all know equity fund gives huge returns so it also has high risk.
We all have heard of ELSS funds, which save our tax a lot. ELSS comes with a lock-in period of three years. It gives a handsome return. You can deduct your tax up to 1.5lakh.
Summary of Equity Mutual Fund Benefits
- Experienced Fund Managers
- Low Cost
- SIP (Systematic Investment Plans)
Types of Equity Funds
Small Cap-Small Cap Mutual Funds invest in startup companies or developing firms. Small Cap funds have high risk. “CAP” stands for the size of that company in which the fund will invest. Most of Small Cap funds invests 40%-10% in large-cap or mid-cap funds to provide some stability in their investment.
Mid Cap– Mid Cap falls in between of large cap and small cap. As the name suggests mid-cap mutual fund invests in those companies who can grow big. Mid Caps are risky but they give a good return. If you are investing in mid-cap you have to stay there for a long run.
Multi-Cap- Multi-Cap funds invest in stocks across the market capitalization. Their portfolio is diversified this has a lower risk than the small-cap and mid-cap fund. Not so aggressive investors can invest in this.
Large Cap – As compared to Small Cap, Mid Cap and Multi Cap large cap is less risky. This invests in large or big companies who have a good track record these companies are well-established players. Large caps are for those who don’t want to take any kind of risk.