While investing in equity mutual funds you will give your money to a mutual fund and they will invest your money in inequity stocks. It may have profit or loss, everything is shared with you and there are many techniques involved in schemes of the mutual fund. Being a long-term investor, you should know the techniques behind the scheme and let’s see some of the techniques in this session.
Objectives of Investment in Equity Mutual Funds:
- All the equity funds are not of the same size and there are many types in that. Each type will depend upon the objective of the investment and risks involved in it.
- The risk in this type of funds is nothing but the capital investment which is done by the investors. The funds come with certain purposes and accomplishing the same is the basic reason why the risk is borne.
- The stocks have certain market caps including mid, large or small cap and the risk that is to be borne will be lower with regards to mid and small cap.
- The objective will also be based on investing in all the stocks across the market capitalization.
- There may be savings schemes tied to equity and this may be deployed for helping in saving your taxes. This can be done by deploying investments across several avenues such as infrastructure and banking along with global equity.
Investment Strategy of Equity Mutual Funds:
Being an investor, you must know about the investment strategies followed by the fund house and also the methodology followed for the stocks which are selected. The methodology styles or key strategies involved are as follows.
Selection-Based Strategy
The sector will be selected at the very beginning as part of the selection based strategy and then the very best stocks will be chosen for being added to one’s portfolio.
Bottom-up Strategy:
In this, they will select the stocks by researching more ignoring the sector.
Growth Strategy:
They will invest your fund in companies and the funds will have a regular track record of profit and growth so that you can continue it in the future.
Value Strategy:
In this type, the fund you have invested may be of low value currently, but it will have a potential to grow exponentially in the future.
