Understanding different types of Equity fund

What are Equity funds?

Equity fund India invests its shares in different companies. The shares are distributed across various sectors or on a focused industry. Thus the fund manager offers great returns to the investors. There is a certain level of risk involved with Equity funds because they depend on the current market condition. Selecting your suitable Equity fund can be difficult. We must have a vast knowledge of all types of Equity funds and their qualities before investing our money. Below, different types of Equity funds are discussed. 

Types of Equity Funds:

We can divide Equity funds into different categories. There are several schemes under each category.

Based on market capitalism:

Equity fund India can be divided into few types depending on the capital of a company. Those are:

ü Large-cap funds

These funds deal with the top 100 companies in the market. These schemes invest 80% of the total assets into shares and stocks. They invest in companies with large capital. Such companies are comparatively consistent.

ü Small-cap funds

These schemes invest their money in small capital companies. They are usually at the 250th number on the market capitalization list. In the small-cap fund, 65% of the asset is invested in small companies. They are high-risk investments but they give great returns. 

ü Mid-cap funds

These schemes also invest 65% of the total asset into socks and shares. They deal with mid-cap companies. These companies stay between 100 and 250 in the market capitalization list. They give better returns than large-cap companies but are more volatile.

ü Multi-cap funds

These schemes invest in small-cap, large-cap, and mid-cap companies. The fund manager reallocates the assets depending on the market fluctuation. 

Based on Investment strategy:

Equity fund India can be further divided as Sectoral Funds. Some Equity funds put their assets into particular sectors, like infrastructure, technology, real estate, and others. These are called Sectoral funds. It also has three types:

·        Thematic funds

In this fund, the investment pattern follows a particular theme. The money is allocated into multiple sectors according to the set theme. International stocks, Business funds are examples of Thematic Funds.

·        Focused fund

These schemes invest in a particular company, with a maximum of 30 stocks. Such schemes usually follow a focused pattern.

·        Contra Equity Fund

These schemes work with under-performing stocks assuming that in the future, they will rise again. Contra Equity Fund analyzes and evaluates the market and invests in such stocks. 

Based on investment style:

We can categorize Equity funds depending on the investment style.

ü Active funds:

The fund manager himself manages such schemes. They handpick the stocks.

ü Passive funds:

Here, the fund manager does not select the stocks. They remain inactive. These schemes track the ongoing market index and invest accordingly. 

Based on Tax benefits:

You can enjoy certain tax benefits by investing in some Equity fund India.

Ø ELSS:

Equity Linked Savings Scheme saves our tax. It has a three years lock-in period. 80% of your assets must be allocated into Equity. This is a mandatory rule of ELSS. It offers Rs 1.5 lakh tax benefits under section 80C of the Income Tax Act.

So, these are the major types of Equity funds in India. One can select any of these and enjoy the cash benefits that come with it.