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Equity funds
An equity fund is a type of collective investment scheme that pools money from many investors to purchase a diversified portfolio of stocks (equities). The primary goal of an equity fund is to achieve long-term growth for investors by investing in companies with the potential for capital appreciation. These funds offer diversification, professional management, and potential for higher long-term returns but come with higher risk and volatility compared to other investments, making them suitable for investors with a higher risk tolerance and a long-term investment horizon.
- Investment in Stocks:
Equity funds primarily invest in shares of various companies, providing investors with partial ownership in these businesses.
- Diversification:
By investing in many different stocks, these funds spread risk across various companies and sectors, reducing the impact of any single stock performing poorly.
- Professional Management:
Experienced fund managers research and select stocks to maximize returns while managing risk.
- Long-Term Growth Potential:
The main objective is to generate capital gains and wealth over the long term through market appreciation.
- Market-Linked Returns:
Returns are dependent on the performance of the stock market, meaning they can fluctuate and may result in short-term losses.
- By Market Capitalization:
Funds can focus on companies of different sizes, such as large-cap (large companies), mid-cap (medium-sized companies), or small-cap (small companies).
- By Management Style:
- Actively Managed Funds: These funds aim to outperform a specific market index through active stock selection and management.
- Passively Managed Funds (Index Funds/ETFs): These funds track a specific market index, like the Nifty 50 or Sensex, aiming to mirror its performance.
- By Investment Style:
Some funds focus on growth stocks (companies expected to grow rapidly) or value stocks (companies that appear undervalued).
- By Geographic Focus:
Funds may invest in companies from one country (domestic) or from many countries (international or global).
- By Sector:Some equity funds concentrate on specific industries, such as healthcare, technology, or commodities.