What is Equity Fund and how to invest in it?

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Do you want to invest your money, that too in equity fund but you do not know what is equity fund after all? What is Equity Fund? In this article we will tell you what is equity fund?

How does it work and how can you invest in it? We will give you complete information about this in this article, you are requested to read this article completely so that you can understand properly.

What is Equity Fund?

Friends, let us tell you that if you want to get high return by taking risk on your money. So you must invest in equity fund.

But before that you should know that what is an equity fund? Most of the equity fund is invested in the share market. This mutual fund is most profitable for those investors, who want to get high returns by taking high risk in a short time.

So if you are afraid of taking risk, especially when it comes to money. Then this mutual fund is not for you and you should not even invest in it.

Because even though you get more profit in equity fund, but there is the same risk in it. That’s why you invest in those schemes. In which you keep getting low risk maximum return.

It has often been found that most equity funds are invested on the basis of the market capitalization of the companies. If I say in easy language, all the funds that invest in the share market are called equity funds.

The Government of India also opened the way for the share market for those people. Those who come in the categories of middle class, low middle in the country. So that he can also invest a small amount through mutual funds.

Earlier it was not an option, due to which only rich people used to become richer by investing money in the share market. But now due to the option of mutual funds for the middle class, other people are also participating in it.

Types of Equity Funds

If we talk about the type of equity fund, then equity funds can be divided into many categories. Equity funds can be divided into three categories, such as – Large Cap, Mid Cap, and Small Cap.

Apart from these three funds, there are also many funds, such as diversified funds and sector funds. So let’s know friends about all these types of equity funds.

1. Large Cap Equity Funds

If we talk about large cap equity funds, then most of its funds are invested in the largest companies of the country under this fund.

These are those big companies which are fully established in their area. Compared to companies with small market capitalization, the chances of their sinking are very less.

This is the reason why most people invest their money in these big companies. Because large cap companies are considered to be more secure than small cap companies.

So if you do not want to take much risk on your saved money. Still, if you want to invest in equity funds, then you should invest in large equity funds only.

Because large cap funds are considered the safest for such equity investors. Those who do not want to take too much risk on their money.

But in this you also get a normal return compared to other equity funds. Because the companies that are in these large cap equity funds are already at their peak.

2. Mid Cap Equity Funds

Now let’s talk about mid cap equity funds, friends in these funds are mostly targeted to those companies. Which are medium sized companies, they are neither very large nor very small.

Investing in mid cap equity funds can be a bit risky. Because it may be that in future or at which time you are investing in it.

At that time these middle size companies do not give performance with their full capacity. In such a situation, you may also have to lose your saved money.

But if you want to take a little more risk and want to get more return. Then you can invest in mid cap equity funds.

Suppose you invest your money in mid cap equity funds. Now after a few years if the companies grow continuously and remain successful in maintaining their balance sheet profitable.

So in such a situation, investing in these medium size companies can prove to be very beneficial. If you are one of those people who have the ability to take more risk then you can invest in it.

3. Small Cap Equity Funds

Where do they go to Friends small cap equity funds, in which most of the money is invested only in shares/stocks of small size companies through mutual funds scheme.

That’s why all those mutual funds that invest in these small cap companies go to small cap equity funds.

Their managers, who manage these mutual funds, invest most or all of their funds in these small companies.

This is the reason that the investment made in such a scheme is more risky than the investment made in large cap funds and mid cap funds.

But if we talk about its profit, then you get more profit in these small cap funds than in large cap funds and mid cap funds.

But you also have to keep in mind that the risk is also the highest in comparison to large and mid cap funds. If you want to get high return by taking risk then you can invest in such equity funds.

There is one more thing which makes investing in these companies even more risky. Since these companies are small, less information is available publicly about these companies.

That’s why small cap equity funds are only for those people. Those who want to get maximum return by taking maximum risk on their money.

4. Sector Funds

Sector funds are those funds, under which only some special sector is invested. Under this, investments are made only in the shares of some special sector companies.

Now since the investment of friends sector funds is done only in some special sectors. Which is very limited, so sector funds are considered to be the most risky.

Managers of sector funds invest in only those sectors according to their intelligence. The sectors in which they are likely to profit the most in future.

Understand this with an example, suppose you have invested in a real estate sector fund. So the manager of that fund will invest all your invested money only in companies working in the real estate sector.

This is our advice to all those investors that they should avoid investing in these sector funds. Because there is a lot of risk in it, especially when you are not in a position to take much risk.

Because there is no trust of such funds, even if you want to invest in it. Then you should invest only a small amount of your savings in this so that your savings are safe.

5. Equity Linked Saving Scheme

Friends equity linked saving scheme or which is also called tax saving scheme. This is one of the best schemes for all those investors who want to get tax exemption.

In this, you get tax exemption under section 80C of the Income Tax Act. If you invest 1.5 lakh in all such funds, then you get tax exemption on it.

Such funds come with a lock in period of about 3 years. That is, if you invest in it, then you cannot withdraw money from it for 3 years.

When your investment will be 3 years, then you can withdraw your money from this fund. Equity linked saving scheme is a good option for every small and big investors.

6. Diversified Equity Funds

As its name suggests, these funds do not invest in any particular sectors or any particular companies or business.

Rather, these equity funds invest in all types of sectors. This means that all the funds of this equity fund are not invested in the shares of any particular type of company.

Rather, it invests its funds in big companies, middle size companies and small companies in all these.

Such funds invest in different types of businesses and companies. From which it is found that, by not investing in any special part in the economy of the country. Diversifies your investment.

Benefits of Investing in Equity Funds

Friends, if we talk about what profit you get by investing in equity funds. So let us tell you that you get all those benefits by investing in equity funds.

Which we and you get from mutual funds. As such you do not need to understand any company or its business model to invest in it yourself.

In this you are easy to invest, there is transparency and less risk in it. Which is very important for every single investor, whether it is a small investor or a big one.

Another benefit we get from investing in equity funds. That is that in this you do not have to worry about things related to investing in shares or business area.

Because all this work is done by the managers of that equity funds just like mutual funds. You just have to keep putting your money in these equity funds, the fund manager does the rest.

How to Invest in Equity Funds

If you want to invest in equity funds, then this work is very easy. For this, you can do this with the help of a broker or agent, or you can start investing by going online yourself.

If you are new in this field and you do not have any information related to it. So in such a situation, it would be good for you that you take the help of a broker or agent to invest in equity funds.

By doing this, you get a lot of information related to this market. Along with this, you also get information about what kind of funds should be invested in and which should not.

Even though brokers and agents charge a fee from you for this work. But with this you also get the benefit that you are making your investment under the supervision of some experts.

If you want to invest in equity funds by going online yourself. So you can do it, but then only you and only you are responsible for all kinds of profit and loss in it.

If you know and understand well about share market, mutual funds and equity funds. Then you can invest in online equity funds at your own risk.

For direct investment, you can go to the mutual funds website of companies like reliance. Create your account, in which you have to give your bank details and your personal information for KYC.

In Direct Investing, you can invest in any fund of your own free will. Apart from this, since now you are investing directly, then the fees which you have to pay to your broker or agent are also saved.

If you make direct investment in any equity funds, then you can withdraw your money from anywhere anytime. Or you can invest in it at any time from anywhere.

Note: Before investing in any company, you should have complete knowledge of the financial condition of that company. Like how did that company perform in the last 5 years, was it in loss or in profit. Is there any case going on against him or how much debt is he in? What other projects is he working on for the future? How high are the chances of those projects being successful, you must have all this information.

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Conclusion:

Hope friends, after reading this article of ours, you must have understood this. What is equity fund? How does it work and when should we invest money in it.

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