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What are the different types of equity funds?

mahindra-finance-author

by Mahindra Finance

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June 30, 2023

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4 mins read

Are you looking for an investment to generate higher returns? Is it tough for you to decide? Well, for this, you have the best option of investing in “Equity Funds”. But what are these equity funds? These are basically a type of mutual funds that allows you to make an investment in stocks. You can think about investing via sources like SIP or lumpsum, which then further helps you to invest in stocks.

Equity funds, as compared to the type of mutual funds, are riskier. But as they say, with more risk comes more returns too. Equity mutual funds allow you to invest in stocks of various companies. The investment is based upon the market conditions. You can choose to invest in various types of capitalisation such as “small-cap”, “large-cap”, and “mid-cap” companies.>

Your investment must align with your risk profile and other objectives. If you are looking for a long term goal, then investing in Equity funds is your best choice.

However, there are various kinds of equity mutual funds available. This makes it quite tough for the investors to choose the best one for them. Below are the types of equity funds that will help you to achieve your long term goal.

Large-Cap Funds

If you are looking to invest in companies with large capitalisation, this is a good option. These companies are popular for their large caps with a strong and reputable image. These are listed in the top 100 companies. Amazing right? Well, yes, it is. This is the most suitable option for those investors who are ready to invest in lumpsum.

But unfortunately, the returns from these equity funds are much lower than mid and small caps. Don’t worry! This is the one that provides a longer consistency and stability in returns.

Mid-cap funds

After Large-cap funds come to the Mid-cap funds, which are referred to all those 100-250 companies with medium capitalisation. Investment in this means getting higher returns. Although, these are more risk to large-cap funds but is still considered as the most popular ones amongst the investors.

Small-cap funds

This type of equity funds involves those companies with a small capitalisation of less than 500 crores. It has higher growth potential and is the best choice for investors who are expecting higher returns. Only the investors who have a great knowledge of stocks can choose to invest in this type of funds.

Balanced Funds

If you are looking for equity funds that are a combination of both equity and bonds, then balanced funds is the one for you. Many investors may be looking for better income, financial safety and modest capitalisation. As the name itself says, balanced funds help them strike a balance between all their needs effectively.

You can aim for better capitalisation and income with the help of these equity funds. These are popular amongst retired investors who are seeking growth to overcome inflation.

Sector Mutual Funds

If you look at a particular growing rapidly, you can call such industries with sector mutual funds. For instance, many areas of the economy and banking are growing. So, these equity funds allow you to invest in all those companies which are associated with such growing areas.

These can be further classified into the following-

  1. Real Estate Funds
  2. Utility Funds
  3. Natural Resources funds
  4. Technology Funds
  5. Communication Funds
  6. Financial Funds
  7. Healthcare Funds

You can see that these funds are giving you many sectors to invest in. You just need to decide about it.

Conclusion

Therefore, with a growing economy, investors are looking for various ways to have long term financial security. Above mentioned are a few of the private mutual funds which can be helpful to every investor for meeting their long term needs. You may face a crisis at any time, so secure your future with a suitable investment at the right time!

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