Equity mutual funds potentially offer greater returns as they invest in the stocks of public companies.
Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest money in the stocks of public companies. Stocks represent part ownership or equity in companies and the aim of stock ownership is to see the value of the companies increase over time. Since equity funds invest in stocks, they have the potential to generate more returns. On the other hand, they carry greater risks too such as capital amount loss.
The objective of this scheme is to generate more capital growth from a portfolio consisting of equity and equity related instruments.
Benefits of the Scheme
This is a powerful tool for capital appreciation. Equity schemes are good for investors looking for long-term appreciation over a period of time. Equity funds can be classified into Diversified Equity and Sector Equity funds.
Diversified Equity Funds
These are equity mutual funds that invest in different sectors of the economy to diversify the risk.
Sector Equity Funds
These are special type of mutual funds that invest in stocks that fall into a certain sector of the economy. Here the portfolio is dispersed or spread across the stocks in a particular sector. This type of scheme is ideal for the investors who want to confine their risks and return to one particular sector.