An equity fund is a kind of mutual fund that invests principally in stocks. Equity funds involve higher risks and are more suitable for long-term goals after retirement.
Benefits Of Equity Mutual Fund
These are some of the prime benefits of investing in equity mutual funds –
1. Equity mutual funds have the potential to generate inflation-beating returns in the long run. One can create a higher wealth corpus by investing in these instruments which is not possible through fixed income-based securities.
2. Equity mutual funds further carries the benefits of –
- Diversification
- Professional Fund Management
- Lower Management Cost
3. Equity mutual funds have a number of schemes that can be highly beneficial to investors, which are –
- Tax Savings
- Contra Investments
- Value Investments
- Sectoral & Thematic Investment
Types Of Equity Mutual Fund
Equity funds can be classified into large-cap funds, multi-cap funds, mid-cap funds, index funds, ELSS, providing investors a variety of options depending on their investment requirements.
Large-Cap Funds: These funds invest a large proportion of their corpus in companies having greater market capitalization. These are relatively safer forms of equity investments and generate stable returns.
Mid-Cap Funds: These funds invest their corpus in companies having medium market capitalization. They generate higher returns as compared to large-cap funds.
Small-Cap Funds: In these types of funds, a large portion is invested in companies having small market capitalization. Liquidity of shares is least in case of small-cap funds.
