Financial Awareness Level
What is an Equity Mutual Fund schemes?
Equity mutual fund schemes are type of scheme that primarily invest in stocks of companies. These schemes aim to provide long-term capital appreciation by leveraging growth opportunities in the stock market. Equity schemes are ideal for investors looking for relatively high returns and willing to take on higher risks.
How Do Equity Mutual Fund schemes Work?
Equity mutual fund schemes pool money from multiple investors and invest in a diversified portfolio of equity stocks. The fund is managed by professional fund managers who analyse market trends and allocate investments across various sectors and companies to maximize returns.
Types of Equity Mutual Fund schemes
Equity mutual fund schemes can be categorized based on investment strategy, market capitalization, and sectoral focus:
1. Based on Market Capitalization
- Large-Cap Funds: Invest predominantly investing in large cap stocks
- Mid-Cap Funds: Invests predominantly investing in mid cap stocks.
- Small-Cap Funds: Invest predominantly investing in small cap stocks.
- Multi-Cap Funds: Invests investing across large cap, mid cap, small cap stocks.
- Large & Midcap Fund: Investing in both large cap and mid cap stocks.
- Flexi- Cap Funds: Investing across large cap, mid cap, small cap stocks
2. Based on Investment Strategy (Please note that the stated fund types are not exhaustive in nature)
- Growth Funds: Aim for capital appreciation with a focus on high-growth companies.
- Value Funds: Invest in undervalued stocks expected to perform well in the future.
- Dividend Yield Funds: Target stocks that provide regular dividend income.
3. Based on Sector & Theme
- Sectoral Funds: Invest in a specific industry like IT, pharma, or banking.
- Thematic Funds: Follow investment themes such as infrastructure, ESG (Environmental, Social, Governance), or consumption trends.
Benefits of Investing in Equity Mutual Fund schemes
- High Growth Potential: Equity schemes have the potential to generate relatively better returns compared to debt or fixed-income investments.
- Diversification: Investments are spread across multiple stocks, reducing individual stock risk.
- Professional Management: Experienced fund managers handle investments based on extensive market research.
- Tax Efficiency: Long-term capital gains (LTCG) on equity funds are taxed at 12.5% beyond ₹1.25 lakh and Short-term capita gains (STCG) are taxed as 20% beyond 1.25%(Please note that the same is as on date thereby we kindly recommend you to seek advice from financial advisor before you take any/refrain from any action for latest regulations and guidelines.)
Who Should Invest in Equity Mutual Fund schemes?
- Long-Term Investors: Those looking to build wealth over 5-10 years.
- Risk-Tolerant Investors: Individuals comfortable with market fluctuations.
- Young Professionals: Investors with a longer time horizon for capital appreciation.
Risks of Equity Mutual Fund schemes
- Market Volatility: Prices fluctuate based on economic and market conditions.
- Sector-Specific Risks: Sectoral and thematic schemes may be impacted by industry performance.
- Liquidity Risk: Market downturns may affect redemption value.
You are recommended to seek advice from your financial advisor for better understanding.
How to Invest in Equity Mutual Fund schemes?
- Choose a scheme based on financial goals and risk appetite.
- Compare past performance, expense ratio, and fund manager track record.
- Invest through a mutual fund platform, bank, or financial advisor.
- Opt for a Systematic Investment Plan (SIP) or lump sum investment.
- Track and review scheme performance periodically.
Equity mutual fund scheme offer growth potential but require a long-term approach. Investors should assess their risk tolerance and financial goals before choosing the suitable equity scheme.
Additional Links:
What is a Mutual Fund? - Beginner's Guide to Investing
AMFI - Introduction to Mutual Funds
AMFI - SEBI Categorization of Mutual Fund Schemes
FAQ Section
Are equity mutual fund schemes risky?
Yes, they carry market risks, but long-term investments often mitigate short-term volatility.
How long should I stay invested in an equity mutual fund scheme?
Ideally, at least but not compulsory for 5-7 years to benefit from market cycles and compounding, based on your risk appetite and investment goals
Can I withdraw money from an equity mutual fund scheme anytime?
Yes, but withdrawing early may impact returns and attract exit loads (if applicable). (You are recommended to seek advice from financial advisor before you take any/refrain from any action)
What is the minimum amount needed to invest in an equity mutual fund scheme?
Many funds allow SIP investments starting at ₹100 per month.
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An Investor Education And Awareness Initiative
Visit https://www.hdfcfund.com/information/key-know-how to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints directly with the AMCs. If they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SCORES portal on https://scores.sebi.gov.in/scores-home/. SCORES portal facilitates investors to lodge complaint online with SEBI and subsequently view its status. In case the investor is not satisfied with the resolution of the complaints raised directly with the AMCs or through the SCORES portal, they may file any complaint on the Smart ODR on https://smartodr.in/login.
The information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY
