Mutual funds have gained a lot of traction in the last few years. These funds invest in a wide range of investment instruments including stocks, debt securities, bonds etc. As the name signifies, equity funds are a type of open-ended mutual fund which invest a major portion only in equity stocks.
Equity funds are considered to be a high-risk high return investment option because they rely on market conditions. Therefore, if you plan to invest in an equity fund, it is recommended to get your risk profile updated before proceeding. AN updated risk profile will help you understand the amount or risk which you are capable of taking in the markets.
Equity funds invest in the equities of different companies with the aim to generate higher returns than the market. As per the guidelines of Securities and Exchange Board of India (SEBI), equity funds should invest a minimum of 65% amount in equity and related assets. However, it is also mandated by SEBI that a minimum of 10% corpus should be invested in debt instruments.
Equity funds can be classified in four categories:
· Large-Cap funds – These type of equity funds invest more than 80% corpus in the equities of companies who have a large market capitalization. Such companies are expected to perform more consistently when compared to the other categories.
· Small-Cap Funds – These funds invest at least 65% of the assets into equities of companies with a small market capitalization. Such companies are listed on 251st or below. These funds are highly volatile but offer better returns.
· Mid-Cap Funds – These funds invest 65% assets into mid cap companies. Such companies are listed from 101 to 250 based on market capitalization. These funds are also volatile and offer better returns than large-cap funds.
Multi-Cap Funds – These funds invest in all the three categories in different proportions. The fund managers in such cases use rebalancing and reallocation methods to make the most out
Disclaimer: All content provided is for informational purposes only, and shall not be relied upon as financial/investment advice. Neither CapitalVia nor its employees have a holding or any sort of interest in any stock which is recommended. Recommendations shared, if any, are only shared for information purposes. Although the best efforts have been made to ensure all information is accurate and up to date, occasionally unintended errors or misprints may occur.
