What Is An Equity Fund?
The most popular question that new investors ask is, “What are Equity funds?” So let’s try to answer this.
What are Equity Funds?
The equity funds are a kind of mutual fund by which one can buy ownership in a business. Hence, the term equity is used. These are in the form of publicly traded common stock.
Sometimes the ownership is in the form of private equity funds that are a part of a private company not traded on the stock exchange.
Equity funds are different from bond funds or money funds. The aim of equity fund is long-term growth through capital gains. Some equity funds may focus on a specific sector of the market. The size of the equity fund is determined by the market capitalization and investment style. They are also categorized by whether they are domestic or international.
What are the benefits of Equity Funds?
Following are the benefits of equity funds:
- Equity funds are an ideal investment option for small investors. The benefits which make equity funds suitable for small investors are: low risk, small capital for investment and diversified portfolio.
- According to Nifty returns of past 15 years, Indian stock market has returned about 16% on an average in terms of increase in share prices or capital appreciation each year.
- Another reason why equity funds are an ideal investment option because of a sheer number of funds available.
How to choose Equity funds?
The investors should choose equity funds that are doing well in the bear markets also. One should know how a fund behaves and performs when the market goes bad. This allows one to understand the maximum damage caused by a fund.
As an investor, you should also look for consistency rather than point-to-point returns. Trailing the returns can give a wrong picture, as they will show how a fund has performed lately. Before investing, one should look over 3-5 years of performance.
The aim of the investment should be to stay invested for a long period. People feel that investments should not be done during peak times. But, if invested during peak times and continued for a long period of time, it will give good returns.
The price of equity fund is based on the fund’s net asset value fewer liabilities. A diversified portfolio means the less negative effect on the adverse price change on the portfolio.
Now that you know what are equity funds and the advantages of them, the decision becomes easier for you. So what are you waiting for, go ahead and invest with Angel Bee. Choose from the many options available. If deciding which funds to invest in becomes difficult, Angel Bee’s AI based investment engine ARQ will help out with it. It gives personalized mutual fund recommendations that suit you the best.