What Are Equity Funds?
An equity mutual fund is an investor managed mutual fund, usually a hedge fund, that invests primarily in equities, which are also known as common stock. Unlike bond funds, stock funds are usually not combined with other types of funds. Instead, stock funds are usually concentrated in just one type of equity, such as stocks or bonds. As with all other mutual fund categories, stock funds come in various sizes, are graded on an asset basis, and come in different profit percentages. Most stock funds are normally well diversified across the market.
Equity funds may be both direct and indirect. A direct equity fund invests directly in listed companies. These companies are usually large corporations or investment firms, such as Hedge funds. Indirect equity fund investments are made through discount brokers who obtain the stocks for the discount rates they offer. These rates can vary greatly from day to day and week to week.
Different types of equity mutual funds are available. The most common types of equity mutual funds are: growth funds, income funds, balanced funds, and term funds. Growth funds are usually made up of stocks of companies that have been generating profits for many years. Income funds are made up of stocks or bonds of companies that earn a profit but are more likely to change their earnings status rapidly, thus becoming unstable. Balanced funds are often chosen over other types of equity funds because they do not fluctuate significantly depending on the market. These schemes usually invest in several types of investments.
An index mutual fund is an equity fund that invests directly in the stocks or bonds of pre-selected index companies. Some index mutual funds specialize in particular types of securities, such as commodity stocks, U.S. Treasuries, foreign securities, and so forth. These specialized funds are called "index funds". Many index funds were originally started as part of a wider diversified portfolio and then were separated out into specialized funds to achieve a specific goal.
An exchange-traded fund (ETF) is an equity fund that trades in different securities through an electronic trade. This allows the investor to buy and sell shares without needing to actually go to the stock exchange. An ETF typically holds a variety of stocks or securities that are similar to those held by the underlying index and thus exchanging shares among ETFs is easy and hassle-free.
Each equity fund investment will give you a total return figure. These numbers represent how much the fund managers have earned after giving back the selling price. Remember that the portion of the total return that is given back to investors is usually above what the manager earns. It is important to consider how much money the manager is likely to earn over time when deciding how to structure your portfolio. You can also choose to buy shares directly from the ETF, but this will not give you a complete picture of how well the investment is performing.
Comments
Post a Comment