Which equity funds to invest in

Bond funds often have a low or negative correlation with the stock market. You can, therefore, use them to diversify the holdings in your stock portfolio. However, bond funds carry risk despite their lower volatility. These include:. However, you may want to include bond funds for at least a portion of your portfolio for diversification purposes, even with these risks. Of course, there are times when an investor has a long-term need but is unwilling or unable to assume the substantial risk.

A balanced fund , which invests in both stocks and bonds, could be the best alternative in this case. Mutual fund companies make money by charging fees to the investor. It is essential to understand the different types of charges associated with an investment before you make a purchase. Some funds charge a sales fee known as a load.

It will either be charged at the time of purchase or upon the sale of the investment. A front-end load fee is paid out of the initial investment when you buy shares in the fund, while a back-end load fee is charged when you sell your shares in the fund. The back-end load typically applies if the shares are sold before a set time, usually five to ten years from purchase. This charge is intended to deter investors from buying and selling too often.

The fee is the highest for the first year you hold the shares, then dwindles the longer you keep them. Front-end loaded shares are identified as Class A shares, while back-end loaded shares are called Class B shares. Depending on the mutual fund, the fees may go to the broker who sells the mutual fund or to the fund itself, which may result in lower administration fees later on.

There is also a third type of fee, called a level-load fee. The level load is an annual charge amount deducted from assets in the fund. Class C shares carry this sort of charge. No-load funds do not charge a load fee. However, the other charges in a no-load fund, such as the management expense ratio , may be very high.

Other funds charge 12b-1 fees , which are baked into the share price and are used by the fund for promotions, sales, and other activities related to the distribution of fund shares. These fees come off the reported share price at a predetermined point in time. As a result, investors may not be aware of the fee at all. The 12b-1 fees can be, by law, as much as 0.

It's necessary to look at the management expense ratio, which can help clear up any confusion relating to sales charges. The expense ratio is simply the total percentage of fund assets that are being charged to cover fund expenses. The higher the ratio, the lower the investor's return will be at the end of the year. Determine if you want an actively or passively managed mutual fund. Actively managed funds have portfolio managers who make decisions regarding which securities and assets to include in the fund.

Managers do a great deal of research on assets and consider sectors, company fundamentals, economic trends, and macroeconomic factors when making investment decisions.

Active funds seek to outperform a benchmark index, depending on the type of fund. Fees are often higher for active funds. Expense ratios can vary from 0.

Passively managed funds , often called index funds , seek to track and duplicate the performance of a benchmark index. The fees are generally lower than they are for actively managed funds, with some expense ratios as low as 0.

Passive funds do not trade their assets very often unless the composition of the benchmark index changes. This low turnover results in lower costs for the fund. Passively managed funds may also have thousands of holdings, resulting in a very well-diversified fund. Since passively managed funds do not trade as much as active funds, they are not creating as much taxable income. That can be a crucial consideration for non-tax-advantaged accounts. There's an ongoing debate about whether actively managed funds are worth the higher fees they charge.

Their expenses, low as they are, typically keep an index fund's return slightly below the performance of the index itself.

Nevertheless, the failure of actively managed funds to beat their indexes has made index funds immensely popular with investors of late. As with all investments, it's important to research a fund's past results. To that end, the following is a list of questions that prospective investors should ask themselves when reviewing a fund's track record:. The answers to these questions will give you insight into how the portfolio manager performs under certain conditions, and illustrate the fund's historical trend in terms of turnover and return.

Before buying into a fund, it makes sense to review the investment literature. The fund's prospectus should give you some idea of the prospects for the fund and its holdings in the years ahead. There should also be a discussion of the general industry and market trends that may affect the fund's performance. Typically, the size of a fund does not hinder its ability to meet its investment objectives.

However, there are times when a fund can get too big. A perfect example is Fidelity's Magellan Fund. Instead of being nimble and buying small and mid-cap stocks, the fund shifted its focus primarily toward large growth stocks. As a result, performance suffered.

So how big is too big? Why are past results so unreliable? Large Cap Invests in Top stocks. Mid Cap Invests in Next stocks. Small Cap Invests outside Top stocks. By Diversification. International Invests in world's top stocks. Multi Cap Invests in stocks across market cap. Value Oriented Invests in under-valued stocks with upside potential. Thematic-Dividend Yield Invests in dividend paying stocks.

Sectoral-Banking Invests in banking stocks. Sectoral-Technology Invests in Technology stocks. Sectoral-Infrastructure Invests in Infra stocks. Thematic-Consumption Invests in consumption stocks. Thematic-Energy Invests in Energy stocks. Sectoral-Pharma Invests in Pharma stocks. Thematic Invests in a specific theme. Show all top performing equity funds. How do Equity Funds earn?

How Equity Fund Works? The stock an Equity Fund will invest in depends on two things. The first is the category of the fund. Equity Funds by regulation are categorized based on either their investment style or their investing universe, and they have to stick to rules defined for that particular category by SEBI.

Read more about What is large cap funds? Read more about What is Mid Cap Funds? So, once the fund category is defined, the investment universe of an Equity Fund is defined. The next step is for the Fund to decide which stocks to pick from this universe. This is where the role of the Fund Manager and his team comes into play. These are professionals with expertise in markets and finance. They research and analyze various technical and fundamental indicators such as the profitability of any company, its ability to survive challenging phases in the economy, the sector in which it operates, etc.

And based on this research, they arrive at investment decisions such as which stocks to buy, at which price to buy and sell, how many of them to buy, etc. Also, after buying these stocks, the fund manager continuously tracks how the companies are performing, how the sectors in which they operate are performing, how the economy is performing, and various other crucial factors that can steer the prices of these stocks.

If they feel some of the companies whose shares they had bought wouldn't perform as expected, they take them out of their portfolio. Similarly, if they see some companies showing a lot of promise, they invest in them at an early stage.

Because these fund managers are continually tracking the financial markets and economy, they have the advantage to take such tactical calls and get the best out of equity markets and handle the volatility better. Equity Funds can earn in two ways: One, by buying shares of a company at a lower price and selling it at a higher price. Show all top performing equity funds. Show all top performing tax saving funds. Show all top performing hybrid funds.

Show all top performing debt funds. All Mutual Fund Houses. See All. The highs and lows are determined by the performance of the market. While they offer potentially high returns, they also come with relatively higher risks. Debt Funds: These funds invest in fixed-income securities, including bonds, securities, and treasury bills, among others - these have a fixed interest rate and maturity period.

These offer regular income and growth. The growth might not be at par with equity funds, but there's a steady income flow. Hybrid Funds: These invest in a mix of bonds and stocks and offer the best of both worlds - equity and debt. The ratio can differ; it can be variable or fixed.

This works well for investors who want to earn good returns but also want a safety net that the debt component provides.

Here's a look at the mutual funds: Open-Ended Funds: These funds can issue an unlimited number of units to the investor. Also, there's no restriction on the time period - an investor can thus invest based on their convenience and exit when they like the current NAV.

Closed-Ended Funds: The unit capital of closed-ended funds is fixed, and they sell a specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed-ended fund after its NFO period is over. These funds have a certain maturity tenure. Like any other mutual fund, a closed-ended fund has a professional manager overseeing the portfolio and actively buying and selling holding assets. Interval Funds: These funds take in traits of both open-ended and closed-ended funds.

They can only be exited at certain intervals decided by the fund house; they remain closed for the remaining period. No transactions are allowed for a fixed period of time - your money is not locked-in for longer periods unlike in the case of closed-ended funds. Sector Funds: These invest in one particular sector. The risk is highest since these funds invest only in specific sectors, but they also potentially deliver great returns. In this case, it is important to stay aware of sector-related trends.

Funds of Funds: A Fund of funds is a type of mutual fund which invests in other mutual funds or investment avenues. It is basically an investment strategy that pools in money and invests in other investment funds instead of investing directly in stocks or bonds or other assets.

Actively managed funds: An actively managed fund is a fund in which a fund manager takes decisions on which stock to buy, when to buy it and when to sell it. The aim here is to deliver market-beating returns. Passively managed funds: A passively managed fund, by contrast, simply follows a market index to decide which stocks and their corresponding ratio it should have in its portfolio. There is no regular buying and selling happens and changes in the portfolio are done only when there are changes in the index.

Advantage of Mutual Funds Here's why investing in mutual funds is a good idea: Liquidity Except for the case when you decide to go for close-ended mutual funds, it is easy and hassle-free to buy and exit a mutual fund scheme.

The expense ratio is the fee that is charged by the mutual fund house to manage your funds. How to Invest in a Mutual Fund? For existing Mutual Fund investors For existing Mutual Fund investors, it is equally easy to begin investing. Frequently asked questions How to choose a suitable mutual fund? How much tax do you pay on mutual fund withdrawals? How can you redeem your mutual fund units? Who Should Invest in Mutual Funds?

Latest Blog Posts 6 Things to Know Before Investing in Mutual Funds In our day-to-day lives, whenever we decide to make a significant purchase, say buying a home appliance, we do detailed research, look at each component, and then shortlist what we will buy.

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Invest One-time I wish to invest some of my savings right now. Start Monthly SIP. How long would you like to invest for? Short Term 0 - 2 yrs Ideal for parking money for emergencies or towards short-term goals like a vacation, paying child's school fee, etc. Medium Term 2 - 5 yrs Suitable for planning investment towards larger expenses or financial commitments that are a few years away. Select an investment plan.

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