4 things to know about the equity funds

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A fund that involves the investment in the stocks of the various companies to generate returns is known as an equity fund. They are considered high-risk funds as compared to the other type of mutual funds. Equity mutual funds are of various types and classified on the basis of the objective of the investment.

There are various types ofEquity Mutual Funds. They are classified as follows:

Based on the type of investment:

The equity mutual funds are classified based on the type of investment objective. They are as follows:

  • Small-cap equity funds:

The companies that rank above 250 in terms of their full market capitalization according to the guidelines of the SEBI generally invest in small-cap equity schemes. These funds are high riks as compared to the large or mid-cap funds. They have relatively high returns. The small-cap equity fund’s minimum exposure is 65% of the total assets.

  • Mid Cap Equity Funds:

The mutual funds that invest in the companies ranked between 101 to 250 by their capitalization are known as mid-cap equity funds. They contain less risk as compared to the small-cap funds. The minimum exposure to the stocks is 65% of total assets.

  • Large-cap equity funds:

The companies that rank between 1 to 100 in terms of market capitalization according to the SEBI guidelines invest in large-cap equity funds. The minimum exposure to these stocks is more than 80% of total assets. They are less risky funds.

  • Large and mid-cap equity funds:

The equity mutual funds that divide the allocation between the mid-cap and large-cap equity funds and the instruments related to them are known as large and mid-cap equity funds. The minimum exposure of both mid-cap stocks and large-cap stocks is 35% in each of the total assets.

  • Multi cap funds:

The funds that invest in the small, mid, and large companies are known as multi-cap funds. The minimum exposure to multi-cap funds is 65% of the total assets.

Based on the investment strategy:

The equity funds are classified on the basis of the investment strategy. They are as follows:

  • Top-down strategy:

The top-down strategy includes that the sector for investment is chosen first, and then the stocks are purchased in the portfolio.

  • Bottom-up strategy

The bottom-up strategy explores the good research stocks and invests in them.

  • Growth strategy

Those funds that invest in the companies having a consistent track, growth, and are profitable can maintain their presence on this path.

  • Value strategy

The fund that invests in the companies that have the potential to grow in the future and are available at a low price is known as the value strategy.

Whether I am eligible to invest in Equity Mutual Funds India?

If your investment objective is analysed and you have an investment horizon, then start it today. In the case of long term goals,equity funds are beneficial. They can provide your money and funds to survive in the competitive market of constant fluctuations.

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