Kinds of Equity Mutual Funds – Unleash the Variety
Kinds of Equity Mutual Funds - Unleash the Variety
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If their is one thing that has knocked the door of everyone’s head after the interest rate starting falling is the equity market. With the pandemic many smart ones re-entered the market and a huge lot got insecure about the safety of their investments.
With the stock market reaching new highs again and astonishing the already astonished, some are still mourning while thinking why they redeemed the investment with just a bump on the road when they clearly knew that the equity market is not for quitters and the rest who did dive into the scary ship with high waves of ups and downs can’t stop smiling when seeing their investment portfolios.
So in order to be prepared to grab the next opportunity, improve your knowledge by reading the content below.
10 Kinds of Equity Mutual Funds
1. Multi-cap Mutual Funds
- 65% of investment is done in large, mid and small cap companies.
- No maximum or minimum limit on choosing the market segment.
- Being an open-ended mutual fund scheme their is no fix maturity period.
- Benefit of both better and more secure returns because of diversification between small, mid and large cap companies.
- Most diversified equity funds leading to lower risk than small or mid cap fund.
2. Small Cap Mutual Funds
- 65% of assets are invested in small cap companies.
- High volatility - more risk & more returns.
- Market Capitalization is up to Rs 500 crores.
- Usually in expansion phase.
3. Mid Cap Mutual Funds
- 65% of the total assets are invested in mid cap companies.
- Falls between 101 to 250 companies according to market capitalization.
- Riskier than large cap companies.
4. Large Cap Mutual Funds
- Minimum 80% of the total assets are invested in large cap companies.
- Fall under the top 100 companies according to market capitalization.
- Best wealth creation opportunity for new conservative investors preferring lesser fluctuations.
5. Equity Linked Saving Scheme (ELSS)
- Tax benefit up to Rs 150000 under section 80C.
- Invests at least 80% in equity and equity related instruments.
- Lock in period of 3 years.
- Superior returns than other schemes offering rebate under section 80C like PPF, NSC or Tax saver Bank FDs.
6. Dividend Yield Mutual Funds
- Investment is done in high dividend yield stocks.
- Less risky since the companies are usually stable with good cash flows.
- 65% of the investment is to be in equity but only in dividend yeilding stocks.
7. Thematic and Sectoral Funds
- Money is parked in a specific theme and a theme may contain several sectors such as technology, banking, pharmaceutical, energy, etc.
- High risk since focus is on specific theme or sector.
- At least 80% of money is invested in one particular sector.
8. Passive Funds
- No active management is done through a professional fund manager.
- Investment is done by continuously tracking an index.
- Generates similar returns to the index.
- Best suitable for conservative investors.
9. Contra Funds
- 65% of the assets are put in equity and equity related instruments.
- Takes advantage of market fluctuations by buying underperforming stocks and selling when they do perform in future.
10. Focused Funds
- All the corpus gathered from the investors is to be invested in a maximum of 30 stocks.
- More control to the investor.
- High risk and high return potential.
- Better for aggressive investors who choose the fund based on the stocks bought by the fund.
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Gourav Ahuja
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