Types of Equity Mutual Funds

What is Equity Mutual Fund: -

Equity Mutual funds are those MF which deals in equity market. Those are invested in stocks of various different companies which are listed in exchanges. Those funds give an average annual return of 15% to 20% depends on the sub-category and on the fund managers it can give very high returns too in long run. The magic of compounding is seen here so, one must invest in at-least one equity mutual fund. Generally, these are for aggressive and long-term investors for long term growth (5 years or more).

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Equity Mutual Funds & their Types: 

1. Large Cap Mutual Fund (Blue-chip) – In Large cap mutual funds your money is invested in blue-chip companies, companies whose market capitalization is more than 10,000cr, endeavor to provide better capital appreciation over a long period of time and for beating inflation. 

Risk is low as compared to other funds.

The returns are also low.

Conclusion: - These funds are for risk averse investors, who want equity exposer in high quality stocks and have a long-term investment perspective.

2. Mid Cap Mutual Fund – Minimum investment in equity & equity related instruments of mid cap company’s stocks. Mid-cap funds are open ended equity scheme predominantly for listed companies whose market cap 5,000cr to 10,000cr.

Here risk is moderately high and returns are also high.  

Conclusion: - These funds are for risk averse investors, who want equity exposer in mid quality stocks having a future growth potential and have a long-term investment perspective.

3. Small Cap Mutual Fund – Here, investments are done in small listed company’s stock which have a huge growth potential in future. Small cap funds are open ended equity scheme predominantly investing small cap stocks.

Risk is very high but returns are also very high in long term.

Conclusion: - These funds are for very aggressive investors, who want equity exposer in mid quality stocks having a future growth potential and have a long-term investment perspective.

4. Large & Mid Cap Mutual Fund (Emerging Blue-chip fund) – Investment in equity & equity related instruments of large cap companies and mid cap companies. An open-ended scheme investing in both large and mid-cap stocks.

5. Multi-cap Mutual Fund – An open-ended scheme investing in both large, mid-cap also in small stocks. It is well diversified mutual fund. Multi cap funds can be ideal wealth creators as compared to plain large cap funds. On account of this dynamic investment strategy, these funds may accumulate larger wealth for achieving long-term financial goals that are more than 10 years away.

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6. Contra Fund – Scheme should follow a contrarian investment strategy. This Is also an open-ended scheme following contrarian investment strategy. It is defined by its against-the-wind kind of investing style. The manager of a contra fund bets against the prevailing market trends by buying assets that are either under-performing or depressed at that point in time.

7. Dividend Yield Fund – An open-ended scheme predominantly investing in dividend yielding stocks.  They are known to declare high dividends. Typically, a dividend yield fund invests around 70-80% of its corpus in stocks which have a dividend yield higher than that of the market (or benchmark).

8. ELSS Fund – ElSS or Tax Savings fund are in accordance with equity linked saving scheme, 2005 notified by ministry of finance. It is a saving scheme with a statutory lock in of 3 years and tax benefit as well exemption of up to Rs. 150,000 from your annual taxable income under Section 80C of the Income Tax Act.

9. Focused Fund – It is a scheme which focuses on the number of stocks (maximum 30) minimum investment in equity & equity related instruments – 65% of total assets. An open-ended scheme investing in maximum of 30 stocks (mention where the scheme intends to focus, viz., multi cap, large cap, mid cap, small cap)

10. Sector or Thematic Fund – It is an open-ended scheme investing in respective sectors (mentions the sector). An open-ended scheme following respective theme (mention the theme)

These sectors can be utilities, energy, infrastructure, etc. Sector Funds also sometimes referred to as Sectoral funds can invest in stocks of companies with varying market capitalization and security classes

11. Value Fund – An open-ended scheme focuses on value investing strategy. These funds invest in three types of stocks- under performing, stocks with low Price to Earnings ratio (P/E) and stocks of emerging businesses which have the potential of rapid growth.

Next What are Hybrid Mutual Funds and their sub-types : Click Here

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