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What are equity mutual funds? Every question answered here

What is equity mutual funds?

Equity mutual funds are the mutual funds where asset management company invests your money in the stock market. There are three types of equity mutual funds.

A) Large-cap equity mutual funds –

In large-cap equity mutual funds, the fund manager invests 80% of your money in stocks of Large and already well-established companies, after the reclassification Done by SEBI recently in large-cap equity mutual funds, the fund manager can invest in top 100 companies only. it is the safest option while investing in mutual funds as the risk here is very low. It gives the returns around 10% which will increase exponentially over a long period of time. And I personally think large-cap equity mutual funds are the best option for everyone to invest.

B) Midcap equity mutual funds –

50% of your money will be invested in Large companies and the other 50% in small companies, ranging between 101 to 250. It provides around 15% returns and they are slightly riskier than large-cap.

C) Small-cap equity mutual funds –

You can get around 24% of returns in small-cap as 80% of your money will be invested in several small companies ranging from 251 and onwards as small companies can grow exponentially. Small-cap is riskier than large-cap and mid-cap. Where there is a risk, there is also the chance of getting more profit.

Finally, How to start investing?

Start your investment through SIP systematic investment plan, in that you need to choose any mutual funds which come under large-cap equity mutual funds. Check those mutual fund’s ratings on websites like value research, money control, choose only the mutual funds rated 4 or 5 out of 5. The download grows the app and starts investing through SIP, you can start with any amount.

Now the entry rate in mutual funds is zero but the exit rate is 1 percent which means you can invest without giving any money but at the time of withdrawal of money 1% of your amount to be withdrawn will be charged to keep the asset management company working.

If you want to know how much returns you are going to get in a specific period of time you just need to google the SIP calculator and that enter the amount you are willing to invest per month, returns you are expecting which depends on your equity cap and the total time of your investment and you will get a result as your total invested money and returns on that money.

Strategy to make money.

Always behave distinctly from the market. If the market is at risk and you are facing losses take more risk by switching to mid-cap from large-cap equity mutual funds. And if the market is stabilized then play safe and switch back to large-cap equity mutual funds. This is one of the strategies used by Warren Buffett if you know who he is?

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