Faith Morrow
Equity funds are a type of mutual fund that invests in the stock market. They are managed by professionals who aim to deliver maximum returns while keeping risks under control. These funds are designed to provide investors with a diversified portfolio, typically holding 40-50 stocks, which reduces the overall risk. While equity funds can experience short-term volatility, they are suitable for investors who can maintain their investments for at least five years. Before investing, it is essential to consider factors such as fund objectives, fund type, investment objectives, investment horizon, risk tolerance, and fund performance.
| Characteristics | Values |
|---|---|
| Risk | High |
| Investment Objective | Long-term goals |
| Investment Horizon | Long-term |
| Fund Type | Large cap, mid cap, small cap, multi cap |
| Fund Objective | Accumulate wealth through strategic investments |
| Taxation | Taxed based on the holding period of the investment |
| Cost | SEBI capped the total expense ratio at 2.5% |
| Expense Ratio | Choose a fund with a lower expense ratio |
Large-cap funds
- Nippon India Large Cap Fund: This fund has consistently delivered high returns and is ranked as a "Genius" fund by ET Money.
- ICICI Prudential Bluechip Fund: Another top-performing large-cap fund with impressive returns, also ranked as a "Genius" fund by ET Money.
- Baroda BNP Paribas Large Cap Fund: This fund has delivered strong returns and is a good option for those seeking exposure to India's top companies.
- Invesco India Largecap Fund: With consistent returns, this fund offers investors a chance to invest in some of the biggest brands in India.
- Edelweiss Large Cap Fund: This fund has provided solid returns and is a good choice for those seeking a less volatile investment option.
- Bandhan Large Cap Fund: Offering returns above the average for large-cap funds, this fund provides access to well-established companies.
- Aditya Birla Sun Life Frontline Equity Fund: With strong historical performance, this fund allows investors to become part-owners of some of India's top companies.
- DSP Top 100 Equity Fund: This fund has delivered impressive returns and provides exposure to large-cap companies across different sectors.
- Mahindra Manulife Large Cap Fund: Although it has a shorter history compared to others, this fund has provided solid returns and is worth considering.
- Canara Robeco Bluechip Equity Fund: With consistent returns, this fund invests in well-established companies, offering relatively less volatile returns.
When investing in large-cap funds, it is important to consider your investment goals, risk tolerance, and time horizon. These funds are suitable for those with long-term goals and a minimum investment horizon of 5 years. Remember to diversify your portfolio and consult a financial advisor before making any investment decisions.
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Mid-cap funds
When selecting a mid-cap fund, it is important to consider the fund manager's expertise, the fund's historical performance, the expense ratio, and the fund's risk profile. The fund manager's market understanding, investing strategy, and management style can significantly impact the fund's performance. It is also crucial to analyze the fund's performance across various market cycles to determine its consistency in providing excellent returns. Additionally, the expense ratio, which accounts for fund management fees, should be considered to ensure affordable investment.
- Motilal Oswal Midcap Fund
- Mahindra Manulife Mid Cap Fund
- HDFC Mid-Cap Opportunities Fund
- Edelweiss Mid Cap Fund
- Nippon India Growth Fund
- Kotak Emerging Equity Fund
- Baroda Midcap Direct Fund
- Invesco India Mid Cap Fund
- Sundaram Mid Cap Fund
- Aditya Birla Sun Life Nifty Midcap 150 Index Fund
- Motilal Oswal Nifty Midcap 150 Index Fund
- Tata Midcap Growth Fund
- Nippon India Nifty Midcap 150 Index Fund
Before investing in mid-cap funds, it is essential to understand the associated risks, such as liquidity and market risks. Mid-cap equities may not be as widely traded as large-cap stocks, impacting the ease of buying and selling shares for investors. Additionally, mid-cap firms may be more sensitive to market swings, resulting in higher volatility. It is also important to carefully consider the fees and charges associated with mid-cap funds, as they often charge higher fees than large-cap funds due to the extensive research required to identify undervalued mid-cap companies.
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Small-cap funds
When considering small-cap funds for your investment portfolio, it is crucial to assess your risk tolerance and investment goals. Small-cap funds are ideal for investors seeking long-term capital growth and those with a high-risk appetite. These funds are suitable for investors who can remain invested for more than five years, as small companies require a longer time to grow and generate profits.
- HSBC Small Cap Fund Fund (Direct Growth Option)
- Quant Small Cap Fund (Growth Option)
- Tata Small Cap Fund (Direct Growth)
- Nippon India Small Cap Fund (Direct Plan - Growth)
- HDFC Small Cap Fund (Direct Growth)
- Franklin India Smaller Companies Fund (Direct Growth)
- ICICI Prudential Small Cap Fund (Direct Plan - Growth)
- Canara Robeco Small Cap Fund (Direct Growth)
- Vanguard Small-Cap Growth Index
- Victory Sycamore Small Company
It is important to conduct thorough research before investing in small-cap funds, as they carry higher risks. Diversification, long-term investment horizon, and careful fund selection based on past performance are key factors to consider when investing in small-cap funds.
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Multi-cap funds
- Nippon India Multi Cap Fund
- Mahindra Manulife Multi Cap Fund
- ICICI Prudential Multicap Fund
- Invesco India Multicap Fund
- Sundaram Multi Cap Fund
- Aditya Birla Sun Life Multi-Cap Fund
- Bandhan Multi Cap Fund
- Bank of India Multi Cap Fund
- Canara Robeco Multi Cap Fund
- Edelweiss Multi Cap Fund
- Franklin India Multi Cap Fund
- Mirae Asset Multicap Fund
- Motilal Oswal Multi Cap Fund
- PGIM India Multi Cap Fund
When investing in multi-cap funds, it is important to consider factors such as investment goals, expense ratios, risks, portfolio diversification, liquidity, and buying options. These funds have a moderate risk-return profile, and it is recommended to stay invested for at least 3-4 years.
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Active vs passive funds
When it comes to equity funds, there are two main types of funds to choose from: active funds and passive funds. Both types of funds aim to make money from a range of assets, including shares, bonds, property, and commodities. However, there are some key differences between the two.
Active funds are managed by a fund manager or a management team who make decisions about how to invest the fund's money. The job of an active fund manager is to choose which investments to hold within the fund, with the goal of outperforming a stated benchmark or index, such as the FTSE 100. They actively buy and sell stocks to try to achieve this goal. When considering active funds, it is important to look at the fund manager's long-term track record across different market conditions. However, past performance is not always a reliable indicator of future results. Active funds tend to have higher fees, typically ranging from 0.6% to 1.5% annually, to cover the cost of the fund manager's expertise.
On the other hand, passive funds aim to match the returns of a specific market or index rather than trying to beat it. These funds simply replicate the movement of the market they are tracking. For example, a passive fund tracking the FTSE 100 will buy shares in all 100 companies in the same proportions as their market value. This means that the value of the fund will move in line with the change in the value of the index. Passive funds have much lower fees compared to active funds because they do not require the same level of management. However, with passive funds, your return depends entirely on the performance of the index being tracked, so if the market falls, so will your investment.
So, which type of fund is right for you? The answer depends on your investment goals, risk tolerance, and personal preferences. If you are looking for a low-cost option and are comfortable with your investment simply tracking the market, then passive funds may be a good choice. On the other hand, if you are willing to pay higher fees for the potential of higher returns and want a fund manager to actively manage your investments, then active funds may be more suitable. It is also worth considering combining both types of funds to create a diversified portfolio. Remember, investing in equity funds carries a certain level of risk, and it is recommended to stay invested for at least five years to weather short-term volatility.
- HDFC Large and Mid Cap Fund (G)
- DSP ELSS Tax Saver Fund (G)
- Mirae Asset ELSS Tax Saver Fund (G)
- ICICI Prudential Value Discovery Fund (G)
- Parag Parikh Flexi Cap fund (G)
- ICICI Prudential Bluechip Fund (G)
- Motilal Oswal Large and Midcap Fund (G)
- ICICI Prudential Infrastructure Fund (G)
- HSBC Small Cap Fund Fund (G)
- DSP India T I G E R Fund (G)
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Frequently asked questions
The best equity funds to invest in depend on your financial goals and risk tolerance. Some top-performing equity funds include HDFC Large and Mid Cap Fund, DSP ELSS Tax Saver Fund, and Mirae Asset ELSS Tax Saver Fund.
When choosing an equity fund, consider the fund objective, fund type, your investment objective, and investment horizon. Assess the risk involved and ensure the fund aligns with your financial goals.
Equity funds offer a diversified portfolio, managed by professionals who aim to maximize returns while controlling risk. They are ideal for long-term financial goals, such as retirement planning or children's education.
Equity funds earn money through capital gains and dividends. Capital gains are made by buying and selling stocks at different prices, while dividends are distributed by the companies in which the fund invests.
Equity funds are subject to market risk and can be volatile in the short term. It is important to stay invested for the long term, typically at least five years, to minimize risk and maximize returns.
