What is Equity Fund and how to invest in it?

Do you know what is Equity Fund? Today many people are in the same dilemma as what are Equity Funds. There is no concrete information available on any website related to these funds. For this, today we have brought this post related to equity funds for you. Our post will answer all your questions related to equity funds.

We have already told you about Mutual Funds on our website, what are these Mutual Funds and how they work. So as we mentioned earlier that we can divide Mutual Funds into 3 types, Debt, Hybrid, and Third Equity.

Equity Fund is that scheme of Mutual Fund, which invests exclusively in shares/stocks of the company. They are also called Growth Fund. Equity Funds are considered to be the most popular of these three funds. So let us know what is this Equity Fund And what are their benefits.

What is Equity Fund?

An equity fund is a mutual funds scheme that invests primarily in the shares/stocks of companies. They are also called growth funds.

Most of the investment in Equity Fund is used for investing in stock markets. These Mutual Funds can be beneficial for those investors who are ready to take risks in the stock market. Because if there is more profit in equity fund then along with it the risk is also high. Through equity funds, investments are made in equity-related things in the secondary market.

Equity Funds offer high returns with high risk. Most equity funds invest according to the market capitalization of the companies. In simple words, the funds which invest in the stock market are called equity funds. Most of these people invest with the thought of earning more profit in less time.

Types of Equity Funds

Equity Funds can be classified in many ways. Equity funds are mainly divided into Large Cap, Mid Cap, and Small Cap. But apart from these, there are many other funds like diversified funds and sector funds, let's know about them.

1) Large Cap Equity Funds: 

Large-cap equity funds are mostly invested in large companies. These companies are well established in their field and the chances of their sinking are less than new or companies with low market capitalization.

For this reason, large-cap companies are considered safe for investment. Only large companies have the possibility of being in large-cap. For this reason, only, large-cap funds are considered suitable for such equity investors who do not like to take too much risk even in equity funds. These types of funds provide simple returns with low risk.

2) Mid Cap Equity Funds: 

In mid-cap equity funds, most of the medium-sized companies are targeted and invest in medium-sized companies only. Investing in these companies involves some risk. Because the company may not be able to perform to its full potential.

And you lost your money. But investing in such funds can also benefit you. If the invested company develops later and becomes a big company. So you can make a lot of profit and it can also be very beneficial for you. Those individuals who have a high-risk tolerance ability invest in such equity funds.

3) Small Cap Equity Funds: 

Mutual fund schemes through which most of their money is invested in shares/stocks of small companies only, then that type of mutual fund is called small-cap equity fund.

Managers of such schemes invest most or all of their funds in small companies only. For this reason, investments made in such schemes are much riskier than mid-cap and large-cap funds, but the returns from small-cap equity funds can also be many times higher than that of large or mid-cap schemes. Investing in these companies is also risky because very little information about them is publicly available. Small-cap equity funds are only for investors with high-risk appetites.

4) Sector Funds: 

Sector fund means investment in a particular sector. In these funds, only the shares of companies of a particular sector are invested. Since the investments made in sector funds are focused on only one sector, sector funds have been considered very risky in the world of funds.

In Sector Fund, the manager of the fund invests in any such sector according to his intelligence, which has the highest potential for profit, for example, Real Estate Sector Fund will invest only in real estate companies. Investors should avoid investing in sector funds. Because there is no trust in such funds. If you want to invest, then invest only a small part of your capital in these funds.

5) ELSS (Equity Linked Saving Scheme) or Tax Saving Funds: Equity Linked Saving Scheme or Tax Saving Mutual Funds is a way for investors to get income tax exemption. Tax exemption is provided under section 80C of the Income Tax Act.

Up to Rs 1.5 lakh invested in these funds are eligible for a tax deduction. Such funds come with a lock-in period of three years. The Lock-in period means that these funds cannot be withdrawn for three years after the investment and such funds can be withdrawn only after the completion of this period.

6) Diversified Equity Funds: 

These equity funds invest in all sectors, this means that these funds are not restricted to investing only in certain types of stocks, they have a lot of investment options. And because of them keep investing in big companies, mid-sized companies, small companies, etc.

This fund invests in companies from different sectors and different industries. In simple words, this type of investment is not limited to investment in any particular part of the economy.

Benefits from Equity Funds

Equity Funds also get all the same benefits that we have from Mutual Funds. Such as ease of investing, transparency, low risk, etc. The major advantage of investing in equity funds is that you do not have to worry about investing in stocks and sectors, all this work is done by the fund manager.

How to Invest in Equity Funds

Investing in equity funds is very easy, for this you can either start investing using a broker or agent or you can start investing online yourself.

If you are new to the market then you should invest with the help of a broker because this will give you all the information related to investments and funds.

Brokers and agents charge you a fee for this. But there is also a convenience that we are investing in with the help of an expert.

In online or direct investment, you are responsible for your own activities. In this, the help of any broker or agent is not taken.

For this, you can go to the website of mutual funds of companies like Reliance, etc. to create an account and start investing. On these websites, you will have to give information like KYC, bank details, etc., which will be used when you buy funds.

In Direct Investment, you can buy and sell funds as per your wish. In the absence of a broker, you also save the additional amount given to him and if you want, you can also invest it in buying funds.

You can invest any time in Direct Investment. There is no time limit in this, you can invest at any time and from any place.

What did you learn today?

I hope you guys must have understood what is Equity Fund. I request all of you readers that you also share this information in your neighborhood, relatives, your friends so that there will be awareness among us and everyone will benefit a lot from it.

I need your cooperation so that I can reach more new information to you guys. But still, if you see any deficiency in this post of ours, then please give your opinion in the comment box and help us to rectify that deficiency.