Do you know what is Equity Fund? There is no concrete information related to these funds on any website. For this, today we have brought these posts related to equity funds for you. Our post will answer all the questions related to your equity funds.
We have already told you about Mutual Funds on our website, what are these Mutual Funds and how do they work. So as we said earlier, we can divide Mutual Funds in 3 ways: debt, hybrid and third equity. Equity Fund is a scheme of mutual funds that invests exclusively in shares / company stocks. They are also called Growth Fund. Equity Funds are considered to be the most popular among these three funds. So let’s know what is this Equity Fund and what are its benefits.
What is Equity Fund
Most of the investment in Equity Fund is used to invest in stock markets. These Mutual Funds can be beneficial for those investors who are ready to take risk in the stock market. Because if there is more profit in the equity fund, then along with it the risk is equally high. Through the equity fund, investment in equity related things is made in the secondary market.
Equity Funds offer high returns with high risk. Most equity funds are invested according to the market capitalization of companies. In simple words, the funds that invest in the stock market are called equity funds. Most of them invest with the idea of making more profit in less time.
Types of equity funds
Equity Funds can be classified in many ways. Equity funds are mainly divided into Large Cap, Mid Cap, and Small Cap. But apart from these, there are many other funds like diversified funds and sector funds, let’s know about them.
- Large Cap Equity Funds: Large cap equity funds are mostly invested in large companies only. These companies are well established in their area and their chances of sinking are new or companies with less market capitalisation are less. This is why large-cap companies are considered safe for investment. Only large companies are likely to be in large caps. Such funds provide simple returns with low risk.
- Mid Cap Equity Funds: In mid cap equity funds, mostly medium-sized companies are targeted and invested only in medium-sized companies. Investing in these companies involves some risk. Because the company may not perform to its full potential. And you had to lose your money. But you can also benefit from investing in such funds. If the invested company develops later and becomes a big company. So you can be very profitable and can be very beneficial for you. Those individuals who have the ability to afford more risk invest in such equity funds.
- Small Cap Equity Funds: Mutual Fund schemes, through which most of their money is invested only in the shares / stocks of small companies, then that kind of mutual fund is called Small Cap Equity Fund. The managers of such schemes invest only the majority of their funds or the entire money in small companies only. For this reason, investments made in such schemes are much more risky than mid-cap and large-cap funds, but the returns from small-cap equity funds are also many times higher than large-cap or mid-cap schemes. Investing in these companies is also risky because very little information about them is publicly available. The small cap equity fund is only for investors with high risk appetite.
- Sector Funds: Sector funds means investment in a particular sector. These funds are invested only in shares of companies of a particular sector. Since investment in sector funds is focused on only one sector, sector funds have been considered very risky in the world of funds. According to its intelligence by the manager of the fund in the sector fund, invests in a sector that has the highest potential for profit, for example, the real estate sector fund will invest only in real estate companies. Investors should avoid investing in sector funds. Because there is no trust of such funds. If you want to invest, then invest only a small part of your capital in these funds.
- ELSS (Equity Linked Saving Scheme) or Tax Saving Funds: Equity Linked Saving Scheme or Tax Saving Mutual Funds is a way for investors to get income tax exemption. Tax exemption is provided under Section 80C of the Income Tax Act. Up to Rs 1.5 lakh invested in these funds are capable of tax reduction. Such funds come with a lock-in period of 3 years. A lock in period implies that these funds cannot be withdrawn for three years after investing and such funds can be withdrawn only after the completion of this period.
- Diversified Equity Funds: These equity funds invest in all sectors. This means that these funds are not restricted to invest only in certain types of stocks. They have plenty of investment options. And because of them, they keep investing in big companies, mid-sized companies and small companies etc. These funds invest in companies from different sectors and different industries. In simple terms, such investment is not limited to investment in any particular part of the economy.
Benefits from Equity Funds
Equity Funds also provide the same benefits that we have from mutual funds. Such as ease of investment, transparency, low risk etc. The major advantage of investing in an equity fund is that you do not have to worry about investing in stocks and sectors, all these work is done by the fund manager.
How to invest in equity funds
- Investing in equity funds is very easy, for this you can either start investing using a broker or agent or you can start investing online by yourself.
- If you are new in the market, then you should invest with the help of a broker, because this will give you all the information related to investment and funds.
- Brokers and agents charge you a fee for this. But there is also a convenience that we are investing with the help of an expert.
- In online or direct investment, you are responsible for your own activities. No broker or agent’s help is used in this.
- For this, you can create an account by going to the website of mutual funds of companies like Reliance etc. and start investing. On these websites, you will have to provide information about KYC, bank details etc. which will be used when you buy funds.
- In direct investment, you can buy and sell funds as per your wish. Due to the absence of a broker, you also save the extra amount given to him and if you want, you can also invest him in buying funds.
- You can invest in direct anytime. There is no time limit in this, you can invest from any time and any place.
Founder & CEO| Fox Investor & A.V.A. Taxway Associates- Corporate & Tax Law Firm
Viibhor Agarwal is a Business & Brand Consultant as well as he is a Financial Expert his area of specialization is to guide Entrepreneur, Start-up’s and SME’s to build the brand value of business financially & legally. He has 8 year extensive experience in this sector