What is Equity Mutual Funds?

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About Equity Mutual Funds:

It is a type of investment fund that pools money from investors to trade primarily a portfolio of stocks, also known as equity securities.
They are also known as Growth Funds.
Equity Funds are either Active or Passive.
- In an Active Fund, a fund manager scans the market, conducts research on companies, examines performance, and looks for the best stocks to invest.
- In a Passive Fund, the fund manager builds a portfolio that mirrors a popular market index, say Sensex or Nifty Fifty.
The fund manager has a passive role in stock selection.
Buy, hold, or sell decisionsaredriven by the benchmark index, and the fund manager merely needs to replicate the same with minimal tracking error.
Equity Funds can also be divided as per Market Capitalisation, i.e., how much the capital market values an entire company’s equity.
- There can be Large Cap, Mid Cap, Small or Micro Cap Funds.
There can be a further classification as Diversified or Sectoral / Thematic.
- In the former, the scheme invests in stocks across the entire market spectrum, while in the latter, it is restricted to only a particular sector or theme, say, Infotech or Infrastructure.

Q1: What are Mutual funds?

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They’re managed by professional fund managers or management teams who make investment decisions based on the fund’s objectives.

Source: Inflows to equity MFs hit record high in June