Equity Schemes
Equity Schemes
Equity Schemes in mutual funds are investment funds that primarily invest in stocks or equities of companies. These schemes are designed to offer capital appreciation over the long term, as they invest in shares of companies across various sectors. Equity schemes are typically suitable for investors with a higher risk tolerance and a longer investment horizon, as they tend to be more volatile compared to debt or hybrid funds.
Key Features of Equity Schemes
Growth Potential: Equity schemes have the potential to provide higher returns over the long term, driven by the growth in the value of the underlying stocks.
Risk Factor: Equity funds are subject to market volatility, and the value of investments can fluctuate based on market conditions and company performance.
Diversification: Investing in equity schemes provides diversification across various companies and sectors, helping to reduce risk.
Types of Equity Schemes
Large-Cap Funds:
Invest in large, well-established companies with a strong market presence. These funds are considered less risky compared to mid-cap and small-cap funds, offering relatively stable returns.
Mid-Cap Funds:
Focus on investing in mid-sized companies that have the potential for higher growth. These funds carry more risk than large-cap funds but offer the possibility of higher returns.
Small-Cap Funds:
Invest in smaller companies with high growth potential. These funds are riskier but can provide substantial returns if the companies perform well.
Multi-Cap Funds:
Invest across companies of all sizes (large-cap, mid-cap, and small-cap). This diversification reduces risk while offering growth opportunities.
Sectoral/Thematic Funds:
Invest in specific sectors (like technology, healthcare, or energy) or themes (like infrastructure or ESG). These funds can be highly volatile since their performance is tied to the performance of a particular sector or theme.
ELSS (Equity Linked Savings Scheme):
A tax-saving mutual fund that offers tax benefits under Section 80C of the Income Tax Act. ELSS funds come with a mandatory lock-in period of 3 years.
Focused Funds:
Invest in a limited number of stocks, typically around 20-30. The concentrated portfolio can lead to higher risk and potential returns.
Dividend Yield Funds:
Invest in companies that have a history of paying high dividends. These funds are suitable for investors seeking regular income along with capital appreciation.