types of equity mutual funds
Mutual funds are considered to be one of the most popular investment options these days. It’s an investment facility formed when an asset management company (AMC) or fund house pools investments from several individuals and institutional investors with common investment objectives.
A financial expert is known as fund manager Managers the total cumulated investment. Mutual funds are an excellent investment option for individual investors to get exposure to expert managed portfolios. Also, one can diversify their portfolio by investing in mutual funds as the asset allocation would cover several instruments.
Equity Mutual Funds
Through equity funds, investors invest in shares of companies across all market capitalisations. A mutual fund is categorised under equity fund if it invests at least 65% of its portfolio in equity instruments. Equity funds usually offer the highest returns among all categories of mutual funds. The profit from equity mutual funds depends on market movements which are influenced by many factors like geopolitical and economic factors. Equity funds are further classified. In this blog, we are going to describe what are the types of equity mutual funds in India are.
In India, Companies with a market capitalisation less than Rs. 500 Crore is considered as small-cap companies. The stocks issued by such companies are termed as small-cap stocks. Small-cap funds are those equity funds that invest in shares of companies with small market capitalisation.
An Indian company with a market capitalization between Rs.5000 crores and Rs.20000 crores are considered as a midcap company. As the name indicates mid-cap company falls in the middle of the pack between large-cap and small-cap companies. An Indian company with a market capitalization between Rs.5000 crores and Rs.20000 crores are considered as a midcap company. As the name indicates mid-cap company falls in the middle of the pack between large-cap and small-cap companies.
The market capitalization of Large-cap companies is above Rs 20,000 crore. Large-cap companies are market leaders. Large-cap funds are those equity funds that invest in shares of companies with large market capitalisation.
Multi-Cap Funds invest across stocks of companies of all market capitalisations. The asset allocation would be changed by the fund managers according to the market conditions. This is done to reap the maximum returns for investors.
Sector or Thematic Funds
Sectoral funds invest in stocks of a particular sector like software or automobile. Thematic funds invest in stocks of companies that operate with a similar theme like travel and tourism.
Equity funds having the intention of tracking and emulating the performance of a popular stock market index such as BSE Sensex and NSE Nifty is called an index fund.
Equity-linked savings scheme (ELSS) is the only kind of mutual funds covered under Section 80C of the Income Tax Act, 1961. Investors can claim tax deductions of up to Rs 1,50,000 a year by investing in ELSS.