Equity Fund in Stock market

Posted by Yogesh Singh on January 12th, 2020

Equity funds give an investor indirect ownership in the company, Wherein unlike debentures one does not get just a fixed interest.

Investments in Equity Funds should be made for long term goals such as retirement, child education etc.as mostly their funds are highly volatile in short duration.

Equity Mutual Funds have about 1/3rd of the total assets under management in the Indian Mutual Fund Market.

There are vast choices before investors, with about 500 schemes to choose from.

For Example, Hdfc Equity Fund is currently the biggest Equity Fund with assets under management of close to Rs21k crore in India market and has given approximately 19.2% (could vary)returns per annum.

Types of equity funds:

Large-cap funds:

  • In the large-cap mutual fund, a large portion of the investment is done in companies that have a huge market of capitalization. Companies that come under Large Cap are big, well-established companies in the equity market. These companies are reliable, reputable and trustworthy.
  • Investment in the large-cap fund is best suited for those investors who have a low-risk appetite.
  • These funds are riskier than debt funds, However, they are less riskier than small and mid-cap funds
  • Large-cap funds have lower growth potential as they are already well established in the market and given investors lower returns on investment as compared to mid and small cap funds. But provide excellent confidence in returns on investment, if invested for the longer duration.
  • Liquidity of shares of the large-cap fund is very high because they are reputed, mature and firmly established players in the market.
  • They are greatly followed in the stock market and usually tapped by institutional investors.
  • Some examples of popular large-cap Funds for 2019:
  1. Birla Sunlife Frontline Equity
  2. SBI Bluechip Fund
  3. ICICI Prudential Focused Bluechip Equity Fund
  4. Franklin India Bluechip Fund

Mid-cap funds:

  • In mid-cap funds, a large portion of the investment is done in companies with medium market capitalization, i.e. are the bunch of 100-250 companies in a market after large-cap companies
  • Stocks of mid-cap companies are a riskier than large-cap but not as risky investment instrument as small-cap
  • Mid-cap funds have better growth potential as compared to large-cap and give investors higher returns on investment as compared to large-cap funds.
  • Investment in mid-cap companies is best suited for those investors who have the medium risk appetite and is most popular among investors.
  • The liquidity of shares of mid-cap companies is more as compared to small-cap funds due to less risky than small-cap funds.
  • Some examples of popular Mid-Cap Funds for 2019:
  1. UTI Asset Mid-Cap Fund
  2. HDFC Mid-Cap Opportunities Fund
  3. Sundaram Mid Cap Fund

Small cap funds:

  • In Small Cap funds, a large portion of the investment is done by the companies with small market capitalization, i.e. having a market cap of less than 1000 crore.
  • Stocks of small-cap companies highly riskier and volatile investment instrument as compared to others.
  • Small Cap funds have exponential growth potential and give investors high returns on investment as compared to Large Cap as well as Mid Cap Funds.
  • Investment in small cap is best suited for investors with high-risk appetite and have good knowledge of stock market must.
  • Liquidity of shares of small-cap companies is least as compared to all.
  • It gives a huge opportunity to wise investors to grow their investment quickly.
  • Some examples of popular small-Cap Funds for 2019:
  1. DSP  Blackrock Small Cap Fund
  2. Franklin India Smaller Companies Fund
  3. Reliance Small Cap Fund

Balanced funds:

  • Balanced funds are one of the types of equity mutual funds, where an asset management company(AMC) invest the money gather into both equity and debt.
  • These are highly diversified mutual funds as it contains both debt security and equity volatility.
  • Low volatility funds, having a perfect balance between risk and returns on investment.
  •  At last, the goal is again to make more returns.
  • Some examples of popular balanced funds for 2019:

Sector Mutual Funds:

  • Sector funds invest in stocks of companies that operate in a particular industry or sector of the economy, and. For example, a Steel sector fund will invest in only shares of Steel related companies. Bank sector fund will invest in only Stocks of Banking companies etc.
  • These funds are regularly benchmarked to the index of their particular sector like the gold sector fund is benchmarked to NIFTY gold Index, Banking sector funds are usually benchmarked to NIFTY Banking Index and so on.
  • Sector funds for those investors those have  a higher risk appetite because they can get really good returns for the overall portfolio if the call goes right
  • Some examples of popular sector funds for 2019:
  1. UTI  Infrastructure Fund
  2. Reliance Banking  Fund

Equity Linked Savings Scheme (ELSS):

  • ELSS is a dedicated equity mutual fund scheme that allows investors to save tax.
  • These are Multi-Cap funds with 3 years lock-in and give tax benefit under Sec 80C.
  • They can invest in any stock across Large, Mid & Small Cap
  • Some examples of popular ELSS for 2019:
  1. Axis Long Term Equity Fund
  2. L&T Tax Advantage Fund
  3. Aditya Birla Sun Life Tax Relief 96

Index funds:

  • Index funds are composed to track the performance of a particular index such as Sensex and Nifty
  • Index funds buy all the stocks in a particular index in the same proportion as used by that index in the Share market., thereby performing in coherence with the index.
  • Index funds follow the performance of a particular index to park the money of investors.
  • Index funds are meant to copy the performance of the index.
  • In Index funds, the role of the fund manager is limited to the cost-saving is transferred to investors.
  • Some examples of popular index funds for 2019:
  1. ICICI Prudential Nifty Index Fund
  2. HDFC Index Fund – Sensex Plus Plan

Like it? Share it!

Yogesh Singh

About the Author

Yogesh Singh
Joined: January 12th, 2020
Articles Posted: 1