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Classification of Equity Mutual Funds

This presentation covers the the most relevant topics of equity mutual fund that an investor wants to know, like - what are equity mutual funds, classification of equity mutual funds on the basis of market capitalization, investment style, theme and tax. Also explians how to choose the best category of equity mutual funds and best equity mutual funds and how to achieve superior returns from equity funds?

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Classification of Equity Mutual Funds

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  1. Types of Equity Mutual Funds in MF Industry 'High' Risk, 'Higher' Growth , 'Highest' Returns!

  2. What Are Equity Mutual Funds? • Equity Mutual Funds is a sub-category of mutual funds which diversify the assets in the equities/stocks of the companies. • The margin of profit from the equity funds depends upon the growth prospect of the company. • Investing in equity mutual funds is a good choice for the investors having: 1. Moderate to High Risk Appetite. 2. Long Term Investment Tenure. 3. Desire to Achieve High Returns in the Long Run. • Equity Mutual Funds are Classified on the basis of market capitalization, investment style, sector/theme, and tax.

  3. Classification of Equity Mutual Funds on the Basis of Market Capitalization • On the basis of market capitalization, the equity mutual funds are broadly divided into 4 types: 1. Large Cap Funds: Invests predominantly in the stocks of the companies which are ranked between 1 to 100 in terms of market capitalization. Invetsors should have moderate risk appetite for investing in these funds. 2. Midcap Funds: Invests in companies falling between the range of 101-250. Investors should have high risk appetite. 3. Small Cap Funds: Diversify the assets in the stocks of companies which are ranked above 250. Very Risky Funds. 4. Multicap Fund: In order to provide market opportunities across different market caps, the fund invests in a combination of large cap, midcap, and small cap stocks.

  4. Classification of Equity Mutual Funds on the Basis of Investment Style • An investment style refers to the philosophy followed by the fund managers in managing the fund's portfolio. • Based on investment style, equity mutual funds are of the following types: 1. Active Funds: The funds are actively managed by the fund managers. The fund managers diversify the assets in different equities according to the market conditions. 2. Index Funds: Such funds replicates the portfolio of the indexes such as BSE and NSE, and works on the same foot works.

  5. Classification of Equity Mutual Funds on the Basis of Theme • Sector Funds: These funds invests in a particular sector of the Indian Economy, such as IT, Pharma, Banking Sector, etc. • Thematic Funds: Thematic funds invests in the stocks based on a particular theme. Such funds offers more diversification than the sectoral funds as the stocks are choosenacross different sectors. • International Funds: As the name suggests, the international funds allocates the assets in the equities of foreign companies. • Funds of Funds:FoFs invests in other mutual funds without investing directly in the stocks/equities of the companies.

  6. Classification of Equity Mutual Funds on the Basis of Tax • Apart from long term capital appreciation, the equity mutual funds also provide tax saving benefits to the investors. Such funds are called as ELSS (Equity Linked Savings Scheme) funds. • ELSS: Such funds are listed as tax saving instruments under Section 80C of Income Tax Law. Through mutual fund investment in ELSS, an investor can save up to Rs. 46,800* on an investment of Rs. 1.5 Lakh.

  7. How to Choose the Best Category of Equity Mutual Funds? • The choice of the best category of equity mutual funds will depend on the following characteristics: • Financial Goals: With more risk, comes superior returns thus, an investor should choose the category of mutual fund according to his financial goals. Sectoral funds, thematic funds, small cap and midcap funds require very high risk but can also help you to achieve your financial goals early. • Risk-Appetite: Know your risk appetite beforehand and then park your cash in the category of mutual funds.

  8. How to Choose the Best Equity Mutual Funds? • For choosing the best equity mutual funds, an investor should keep the following things in mind: • Portfolio Allocation: Analyze the portfolio allocation and sector allocation for determining the future growth aspect of the fund. Make sure that the fund managers have diversified the assets in the promising sectors. • Past Performance: Track record of an equity mutual fund will help you to determine the performance during market volatility. • Fund Managers: A fund manager plays an important role in the performance of the fund. Thus, make sure that the fund manager is experienced and have been associated with the scheme for a longer period of time.

  9. How to Achieve Superior Returns from Equity Mutual Funds? • Long Time Horizon: Investing for a longer period of time will help to accumulate larger profits. Moreover, it will also free the investors from the worry of timing the market. • Diversified Portfolio: Don't stick to just one category of scheme. Instead, include a combination of different types of schemes. • Review Portfolio Timely: Never forget to review your portfolio once in an year. • Increase Invested Amount Timely: Through step-up SIP you will able to achieve higher returns in the long run.

  10. Conclusion Equity mutual funds is a category of mutual funds having potential to provide excellent gains in the long term. This category of mutual fund is further sub-divided into other types on the basis of different criteria. The presentation gives a detailed analysis of all the types of equity mutual funds. Thus, choose the best category of equity mutual fund according to your suitability and take a step towards achieving your financial goal.

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