Equity Mutual Funds Advisor in Mumbai, India
Equity funds generate high returns by investing in the shares of companies of different market capitalization. They generate higher returns than debt funds or a fixed deposit.
An equity fund invests 60% or more of its assets in equity shares of companies in varying proportions as mentioned in its investment mandate. It might be purely large-cap fund or mixture of market capitalization. Moreover, investing style may be value-oriented or growth-oriented.
After allocating a major portion of equity shares, remaining amount may be invested in debt and money market instruments. This is done to address redemption requests raised by investors. Our advisors keep on buying or selling a particular stock to take advantage of the changing market movements.
The expense ratio of the equity funds is affected by the frequent buying and selling of equity shares. Currently, SEBI has fixed upper limit of expense ratio at 2.5% for equity funds and is planning to reduce it further. A lower expense ratio translates into the higher returns for investors.
Who should Invest in the Equity Funds?
Your decision to invest in equity funds needs to be guided by risk appetite and investment horizon and Infinitum Wealth advisors explains everything in detail before investing. Generally, an investor who can stay invested for 5 years and more, needs to get into equity funds. These won’t be suitable for relatively short-term owing to stock market fluctuations.
In case you want to save taxes under the Section 80C of the Income Tax Act, then ELSS is regarded the most appropriate investment. ELSS has shortest lock-in period of 3 years and gives higher returns than any other investments eligible under Section 80C.
If you are a budding investor who wants to have exposure to stock market, then large-cap equity funds may be the right choice. These funds invest in the equity shares of the top 100 companies in the stock market. They are well-established companies known for giving stable returns over the long-term.
In case you are well-versed with market pulse but want to take calculated risks, you may think of investing in diversified equity funds. These invest in the shares of companies across market capitalization. These give an optimum combination of the high return and lesser risk as compared to equity funds which invest only in small-cap/mid-caps.
Types of Equity Funds
Equity fund is a broad category of funds, but there are several types of equity funds. Equity funds are further categorized based on their investment mandate and kind of stocks and sectors they invest in.
A. Based on Sector and Themes
Equity funds that focus their investments on the particular sector or theme fall under this category. Sector funds are those that invest in particular industry, like FMCG or Pharma or Technology. Thematic funds are those that follow a particular theme, like the emerging consumer companies or international stocks.
Since sector funds and thematic funds are concentrated in the particular sector. They tend to be riskier than the diversified equity funds because their performance is entirely dependent on the particular sector of the economy.
However, sector and thematic funds can be diversified in the terms of market capitalization.
B. Based on Market Capitalisation
Large-cap equity funds invest in large-cap stocks. Different fund house categorizes stocks differently, but large-cap stocks are stocks of biggest listed companies of the economy. Typically, large-cap companies are the well-established companies, making the large-cap funds stable and reliable investments.
Mid-cap equity funds and small-cap equity funds are the funds that invest in mid-sized and smaller companies respectively. There are many funds that invest in both the mid-cap as well as small-cap funds. They are known as mid- and small-cap funds.
C. Based on the Style of Investing
All the funds discussed above follow active investing style wherein our advisors modify the portfolio composition to suit market movements. However, there are funds whose portfolio composition always imitate specific index.
Equity funds that follow a particular index are known as index funds. These are passively-managed funds that invest in same companies, in the exact same proportions, that make up the index the fund follows.
For example, a Sensex index fund will have investments in all 30 Sensex companies in the same proportion in which companies form part of the index.
4. Performance of Equity Funds in India
Amongst all other categories of mutual funds, equity funds have found to deliver the highest returns to the investors. On an average, the equity funds have generated before-tax returns in the range of 10%-12%. These returns may fluctuate as per the market movements and overall economic conditions