Equity funds are mutual funds that invest at least 65% of their total assets in equity and equity-related instruments. These funds can be actively or passively managed and categorised according to the market capitalisation, investment style of the stock holdings in the portfolio and geography. The following are the different types of equity mutual funds -
Large Cap Funds
Investment Mandate: Invest at least 80% of its assets in equity and equity-related instruments of large-cap companies. (Top 100 companies by market capitalization).
Risk: Very High Risk
Suitability: Investors looking for consistent returns to plan for their goals.
Duration: Minimum 5+ years
Mid Cap Funds
Investment Mandate: Invest at least 65% of its assets in equity and equity-related instruments of mid cap companies (101-250 companies by market capitalization).
Risk: Very High Risk
Suitability: Risk takers with medium to long term goals.
Duration: Minimum 5+ years
Small Cap Funds
Investment Mandate: Invest at least 65% of its assets in equity and equity-related instruments of small-cap companies (251 or below companies by market capitalization).
Risk: Very High Risk
Suitability: Aggressive investors with long term goals.
Duration: Minimum 7+ years
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Diversified/Multi Cap Funds
Investment Mandate: Invest at least 65% of its assets in equity and equity-related instruments of large-cap, mid-cap and small-cap companies in varying proportions.
Risk: Very High Risk
Suitability: For medium to long term goals.
Duration: Minimum 5+ years
Large and Mid Cap Funds
Investment Mandate: Invest at least 35% of its assets in equity and equity-related instruments of large-cap and mid-cap companies each.
Risk: Very High Risk
Suitability: For medium to long term goals.
Duration: Minimum 5+ years
Thematic/Sectoral Funds
Investment Mandate: Invest at least 80% of its assets in equity and equity-related instruments of a specific theme (ESG theme, sharia law, etc.) or sector (pharma, IT, infrastructure, banking etc).
Risk: Very High Risk
Suitability: Investors looking to take advantage of the potential sector/thematic boom.
Duration: Minimum 5+ years
A thematic fund can invest in stocks from multiple sectors that follows a theme, thus can be slightly more diversified than sectoral fund.
Focused Equity Fund
Investment mandate: Can invest in a maximum of up to 30 stocks of companies having a specific market capitalization.
Risk: Very High Risk
Suitability: Investors who want limited stock exposure in long term investing.
Duration: Minimum 5+ years
Contra Equity Fund
Investment mandate: Invest at least 65% of their total assets in equity following a contrarian investment strategy that involves buying and selling in contra (opposite) to the current market sentiments.
Risk: Very High Risk
Suitability: For medium to long term goals.
Duration: Minimum 5+ years
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Value Fund
Investment mandate: Invest at least 65% of their total assets in equity following a value investment strategy that involves buying undervalued stocks.
Risk: Very High Risk
Suitability: For long term goals.
Duration: Minimum 5+ years
Equity Linked Savings Scheme (ELSS)
Investment mandate: Invests at least 80% of its assets in equity and equity-related instruments based on the Equity Linked Savings Scheme, 2005, notified by the Ministry of Finance.
Risk: Very High Risk
Suitability: For tax saving purpose under Section 80C.
Duration: Has a mandatory lock in period of 3 years.
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