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Equity Mutual Funds

Explore the Power of Equity Mutual Funds

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What are Equity Mutual Funds?

Equity Mutual Funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks. They are managed by professional fund managers who make investment decisions based on extensive research and market analysis. These funds offer individuals the opportunity to invest in a wide range of stocks without directly owning them, providing diversification and reducing risk.

Equity funds allow investors to participate in the potential growth of the stock market while benefiting from professional expertise. They offer flexibility, as investors can enter or exit the fund at any time, making it a liquid investment option. These funds are suitable for those seeking long-term capital appreciation and are willing to tolerate market fluctuations.

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Features of Equity Mutual Funds

  • Higher liquidity
  • Provides tax benefits
  • Suitable for long-term investments

Benefits of investing in Equity Mutual Funds

  • Potential for high returns
  • Diversification and risk reduction
  • Dividend potential in addition to potential capital appreciation
  • Flexibility in buying and selling

Types of Equity Mutual Funds

Large Cap Funds

Invest in well-established companies with stable growth potential, offering potential capital appreciation and stability.

Mid Cap Funds

Target mid-sized companies with high growth potential, aiming for long-term wealth creation and capital appreciation.

Small-Cap Funds

Focus on small-sized companies with high growth prospects, offering the potential for significant capital appreciation.

Multi-Cap Funds

Diversify investments across large, mid, and small-cap stocks, aiming for a balanced portfolio and optimal returns.

Dividend Yield Fund

Invest in stocks with a track record of paying dividends, targeting regular income generation along with capital appreciation.

Sector Funds

Concentrate investments in specific sectors or industries, capitalising on growth opportunities within specialised segments.

Value Funds

Seek undervalued stocks with long-term growth potential, aiming for capital appreciation as the market recognizes their true worth.

Index Funds

Mirror a specific market index, providing broad market exposure and aiming to replicate the performance of the index.

Thematic Funds

Invest in specific themes or trends such as technology, healthcare, or sustainability, targeting companies within those themes.

ELSS

Combine equity investments with tax-saving benefits under Section 80C of the Income Tax Act.

Focused Funds

Concentrate investments in a limited number of stocks, enabling a focused approach to generate alpha and outperform the market.

Large and Mid Cap Funds

Invest in strong and stable companies (large-cap) and those with promising growth prospects (mid-cap) creating a balanced mix of stability and potential growth.

Who Should Invest in Equity Mutual Funds?

Equity funds are suitable for investors who believe in the potential of the stock market to generate substantial returns over time and have a long-term financial goal, such as retirement planning or wealth accumulation.

  • Conservative Investors

    Large-Cap, Conservative Hybrid, and Dividend Yield equity funds

  • Moderate Investors

    Hybrid/Balanced, Multi-Cap, and Flexi-Cap equity funds

  • Aggressive Investors

    Mid-Cap and Small-Cap equity funds

FAQs

How does a fund qualify to be an equity mutual fund?

Mutual funds that invest a minimum of 65% in company stocks or equity-related instruments qualify as an equity mutual fund.

What are the key factors to consider when selecting an equity fund?

When choosing an equity fund, factors such as fund performance, investment strategy, fund manager expertise, expense ratios, consistency in delivering returns, your risk appetite and investment horizon should be evaluated to make an informed decision.

Can equity funds provide income through dividends?

Some equity mutual funds, such as Dividend Yield Funds, focus on dividend-paying stocks, offering investors the potential for regular income in the form of dividends, in addition to potential capital appreciation.

Are equity funds suitable for short-term investment goals?

Equity funds are primarily designed for long-term investment goals due to their potential for higher returns and may not be suitable for short-term goals due to market fluctuations and volatility.

What are the tax implications of investing in equity funds?

Equity funds may attract capital gains tax upon redemption or dividends received. It's advisable to consult a tax advisor for a better understanding of the tax implications based on your specific situation.