Sargun Financial Services
Mutual Fund
About Mutual Fund
A Mutual Fund is a vehicle for investing in stocks and bonds. It is not an alternative investment option to stocks and bonds; rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities. The owner of a mutual fund unit gets a proportional share of the funds gains, losses, income and expenses.
Types of Mutual Funds
Large Cap
Large Cap Equity Funds invest a large portion of their corpus in companies with large market capitalization are called large-cap funds. This type of fund is known to offer stability and sustainable returns, over a period of time. Large Cap companies are generally very stable and dominate their industry. Large-cap stocks tend to hold up better in recessions, but they also tend to underperform small-cap stocks when the economy emerges from a recession. Large-cap tend to be less volatile than mid-cap and small-cap stocks and are therefore considered less risky.
Mid Cap
Mid-Cap Equity Funds invest in stocks of mid-size companies, which are still considered developing companies. Mid-cap stocks tend to be riskier than large-cap stocks but less risky than small-cap stocks. Mid-cap stocks, however, tend to offer more growth potential than large-cap stocks.
Small Cap
Small Cap Funds invest in stocks of smaller-sized companies. Small cap is a term used to classify companies with a relatively small market capitalization. However, the definition of small cap can vary among market intermediaries, but it is generally regarded as a company with a market capitalization of less than ? 100 crores. Many small caps are young companies with significant growth potential. However, the risk of failure is greater with small-cap stocks than with large-cap and mid-cap stocks.As a result, small-cap stocks tend to be the more volatile (and therefore riskier) than large-cap and mid-cap stocks.
Historically, small-cap stocks have typically underperformed large-cap stocks during recessions but have outperformed large-cap stocks as the economy has emerged from recessions.
The smallest stocks of the small caps are called micro-cap stocks. While the opportunity for these companies to experience extreme growth is great, the risk to lose a large amount of money is also possible.
Historically, small-cap stocks have typically underperformed large-cap stocks during recessions but have outperformed large-cap stocks as the economy has emerged from recessions.
The smallest stocks of the small caps are called micro-cap stocks. While the opportunity for these companies to experience extreme growth is great, the risk to lose a large amount of money is also possible.
Multi Cap
Multi Cap Equity Funds or Diversified Equity Funds invests in stocks of companies across the stock market regardless of size and sector. These funds provide the benefit of diversification by investing in companies spread across sectors and market capitalisation. They are generally meant for investors who seek exposure across the market and do not want to be restricted to any particular sector. They invest in companies across different market caps and hence reduce the amount of risk in the fund. Diversification helps prevent events that could affect a single sector for affecting the fund, and hence reduce risk.
Equity Fund
An equity fund is a mutual fund scheme that invests predominantly in equity stocks.
In the Indian context, as per current SEBI Mutual Fund Regulations, an equity mutual fund scheme must invest at least 65% of the scheme’s assets in equities and equity related instruments.
Equity mutual funds are principally categorized according to company size, the investment style of the holdings in the portfolio and geography.
The size of an equity fund is determined by a market capitalization, while the investment style, reflected in the fund's stock holdings, is also used to categorize equity mutual funds.
Equity funds are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies). These can be broad market, regional or single-country funds.
Some specialty equity funds target business sectors, such as health care, commodities and real estate and are known as Sectoral Funds.
Equity mutual funds are principally categorized according to company size, the investment style of the holdings in the portfolio and geography.
The size of an equity fund is determined by a market capitalization, while the investment style, reflected in the fund's stock holdings, is also used to categorize equity mutual funds.
Equity funds are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies). These can be broad market, regional or single-country funds.
Some specialty equity funds target business sectors, such as health care, commodities and real estate and are known as Sectoral Funds.
Thematic Equity Funds
These funds invest in securities of specific sectors such as Information Technology, Banking, Service and pharma sector etc., which is specified in their scheme information documents. So, the performance of these schemes depends on the performance of the respective sector. These funds may give higher returns, but they also come with increased risks.
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Why Mutual Funds ?
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.