Mutual Funds

Investing in Equity Funds: Everything you need to know

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You must know about equity fund investment schemes if you are familiar with mutual funds. But if this is your first time investing, understand that equity funds should be your top choice. They are the key to reap the most benefits.

A mutual fund is a financial arrangement where several investors pool their money to buy shares. A fund manager is usually in charge of it. Mutual funds cater to a variety of individuals with varied investment objectives. But, before you invest in a plan, there are certain conditions you need to consider. They are – your investment goal, asset allocation, investment horizon, and risk-taking ability. An individual with a higher risk-taking capability can best enjoy equity funds.

Equity funds may be volatile in the short term but provide higher returns in the long run. The rule is – the fund manager invests in company stocks across market capitalisation. The reason why they are also called stock funds.

What are the types of equity funds?

Based on market capitalisation, we can categorise equity funds into:

  • Large-Cap Equity Funds: A fund manager invests at least 80% of the capital in shares of a large-cap company.
  • Mid-Cap Equity Funds & Small-Cap Funds: These need an investment of 65% of the total capital. It applies to both Mid-Cap and Small-Cap companies.
  • Multi-Cap Equity Funds: It invests 65% of the resources in equity shares. The resources are not spent only on the equity shares of a single company but on a mix of Small-Cap, Mid-Cap, and Large-Cap companies. The varied nature of the portfolio decreases the risk percentage to an extent. Its ability to cut back losses makes it one of the best mutual funds to invest in, in the market.

What are the benefits and features of investing in equity funds?

  • Higher returns: Investors often go for debt mutual fund schemes since they are low-risk. Yet, an equity fund is the best option for creating wealth. An individual can get a wide profit margin by staying invested for five years at the least.
  • Diverse portfolio: Equity funds invest in companies across market capitalisations. Hence, shareholders have an option for a diverse portfolio. Investors consider it one of the best mutual funds to invest in the market. If one company suffers losses, it would not have much effect on the shareholder. The reason is there are several investments in different companies. 
  • Nominal investment costs: Individuals can invest in equity shares at a price as low as five hundred rupees per month. As per Systemic Investment Plan or the SIP, the shareholders can invest a small amount of money. It takes place at an allotted time each month. They do not need to make a significant investment all at once.
  • It is best for first-time investors: Individuals new to the mutual funds market can go for equity fund investment schemes. Professional fund managers manage the proceedings of the funds. The shareholder only needs to lay down their investment goals or objectives.
  • The responsibility of SEBI: The Securities and Exchange Board of India (SEBI) ensures transparency of financial activities. The shareholder can see the performance graph of a particular mutual fund. They can assess the data and make decisions according to that.
  • Limit to the expense ratio: Regular buying and selling of stocks is a common practice in equity funds. Such transactions can affect the expense ratio rate. To that end, the SEBI has put a limit to the expense ratio of equity funds at 2.5%.

What are some of the best mutual funds in India?

Regarding best equity mutual fund schemes, there are many options at your disposal. While choosing a plan, keep in mind its expense ratio. At times, the fund age affects its performance. As per reports, newer funds may perform better than older ones.

  • Quant tax plan direct growth – As per ET Money, this scheme has always served well. It is an ELSS-type mutual fund plan with an expense ratio of 0.57%. Launched in January 2013, its fund age is nine years, and eight months.
  • Quant Active Fund Direct-Growth – It is a multi-cap mutual fund scheme. This mutual fund investment plan has an expense rate of 0.58%. The fund age is nine years, eight months. Ideal for investors with at least a three-year investment window.
  • Canara Robeco Bluechip Equity fund. The scheme is a large-cap mutual fund investment plan with a 0.38% expense ratio. Its fund age is around nine years, eight months. It is ideal for you if your investment horizon is more than five years.
  • Nippon India Small-cap fund. It is a small-cap fund scheme launched in 2013. It has a fund age of nine years and eight months. It is pretty volatile but also provides a high rate of returns. The mutual fund has an expense ratio of 1.02%. 
  • Axis Mid Cap Direct Plan-Growth – It is a mid-cap fund with an expense ratio of 0.54%. Mid-cap funds, it is less risky and volatile than small-cap funds. Coming to returns, it is slightly lower than small-cap mutual funds. The fund age is nine years and eight months.


Once you are aware of the types of equity funds that are available, you can start investing. Always remember that equity funds are ideal if you want to make long-term investments.

They are prone to volatility. And hence, equity funds are not recommended for investment periods shorter than five years. 

Do you want professional advice about mutual fund management? Get in touch with professionals at Piramal Finances to find some of the best mutual funds in India. Our group of experts can help you meet your investment objectives and aid you with personal loan requirements if any.