Definition Definition

What Is Equity Fund? Advantages of Investing in Equity Funds with Example

What is Equity Fund?

Equity Fund is a type of investment portfolio that primarily trades equities. It can be handled actively or passively. Stock Funds are another name for it. They are classified primarily depending on the size of the firm, the investing strategy of the portfolio's assets, and its location.

Understanding Equity Fund

Certain fund features identify equity funds. Some popular techniques of categorizing funds include- Geographical–  Can be centered on a single local country region, such as the UK, or on many distinct nations, such as globally. Size– Can be engaged in various market capitalization firms. Nature of Investment– Can be based on various investment methods, such as value- income- growth-low-volatility, and so on. Areas– Different businesses, such as tech, property investment, and markets, are the concentrations. 

Advantages of Investing in Equity Funds

Since you have a basic idea of what equity funds are, these are some of the main reasons to strongly consider them:

  • Future Capital Growth- Equity as an investment has the tendency to create the best long-term gains.
  • Expert Fund Management- Profits obtained from long-term capital development without having invested directly in the share market. A better management team takes care of making decisions for the group.
  • Diversification- Because your contribution is dispersed among multiple firms based on the program's purpose, equity funds also assist you to spread the investment.

Practical Example

Mr. John owns 20% of ABC Company and 33.33% of RPS Company. Both companies have other shareholders, Ms. Erica, who owns 30% of ABC Company and another 10% of RPS Company. All these came under their equity funds. 

In Sentences 

  • Equity fund is a  simple and cost-effective method to participate in the stock market.


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