equity mutual funds

What are Equity Mutual Funds

Equity mutual funds are those funds that invest somewhere around 65% of their portfolio in ‘stocks’. Such funds could be managed – passively or actively. Though, best equity mutual funds end up giving high returns over a medium-long term horizon. Since equity oriented mutual funds are heavily invested in stocks, hence, there is risk; the fund value might face some frequent fluctuations and being the reason, investing in equity mutual funds is generally preferred by aggressive investors. TIP: Make sure to analyze the parameters before selecting equity mutual funds.

Best 5 Equity Mutual Funds

Kotak Emerging Equity Scheme (G)

Mutual Fund 5 Star

Returns 3Y:  16.44%

L&T Midcap Fund (G)-Direct Plan

Mutual Fund 5 Star

Return 3Y: 19.1%

SBI Small Cap Fund (G) - Direct Plan

Mutual Fund 5 Star

Return 3Y: 19.12%

Mirae Asset Emerging Bluechip (G)

Mutual Fund 5 Star

Return 3Y:  22.27%

Canara Robeco Emerging Equities Fund

Mutual Fund 5 Star

Return 3Y: 19.63%

  • Past Performance Is No Guarantee of Future Results


  • By investing in the best equity mutual funds, you get exposure to various stocks just by investing a nominal amount. But the risk will be there for your portfolio, hence, put in the decision rightfully.
  • You end up earning capital gains as you redeem units of equity mutual funds. These earned capital gains are taxable, but the tax rate depends on the invested period (called as a holding period).
  • You also get sign-of relief whilst investing in a type of Equity Funds called ELSS which is a tax-saving investment under section 80C of the Income Tax. With the minimum lock-in-period of 3 years and good potential of high returns, ELSS has a good track record compared to other options under 80C. In ELSS too, you can either do a lumpsum investment or a

Types of equity funds


  • Based on Themes and Sector: Equity-based mutual funds that particularly focus their investments on a particular theme or sector comes under this category. Thematic funds follow the road of a particular theme, like international stocks, or emerging consumer companies. Sector funds end up investing in one selected industry, like Technology, Pharma or FMCG. Since thematic funds and sector funds focus on a particular theme or sector, they turn out to be riskier.

  • Based on Market Capitalization:

  • Large-cap equity mutual funds: Usually, large-cap companies are established in a good way, thus, making them reliable investments and stability in large-cap funds.

  • Mid-cap equity mutual funds: They end up investing in medium-sized companies.

  • Mid-and-small-cap equity mutual funds: They are even funds that invest in both small-cap and mid-cap companies.

  • Small-cap- equity mutual funds: We know that small build companies are prone to volatility, therefore, small-cap mutual funds deliver fluctuating returns.

  • Multi-cap equity mutual funds: Funds that invest across the market capitalization, which is in small-cap, middle-cap, and large-cap are called multi-cap funds.

  • Based on Investment Style: Equity mutual funds follow a particular index which is known as ‘index funds’. These funds are passive that are invested in the same companies, in the same propositions. Also, index funds are low-cost funds because there is no such involvement of a fund manager.

How to Invest in Equity Mutual Funds with Gulaq

Investing in equity mutual funds is not a bad idea; and with Gulaq the process is simplified with just a few clicks. The investor can filter her requirements in accordance with goals, returns, risks, and horizons. Once sorted, the investor came hop on to Gulaq and start investing. Precisely, an economical platform.

Who should invest in Equity Mutual Funds

Before investing in equity mutual funds, don’t forget to consider the investment horizon and risk appetite whilst investing. These funds are good to go for the investor having an investment horizon of 5 years or may be more. For the short-term investor, this might not be reliable because of the fluctuations in the stock market. If tax-savings are revolving in your mind, go for ELSS; it has the lock-in-period of 3 years. Perhaps, giving better returns as compared to others. If you have good hands on investment, take the pick in diversified equity funds (the best combination of return and risk).

How do Equity Funds work

An equity mutual fund is a fund which basically invests in stocks. An equity fund manager invests more than 60% of their respective fund asset in various proportions. It could be large cap, mid cap or small cap depending upon the fund manager’s interest. The fund manager’s mode of investing may be value oriented or growth oriented. Since Equity investments are highly volatile, that’s why they invest a substantial amount of their portfolio in debt and money market instrument. This is done in order reduce the risk tolerance to a certain extent. They also make buying and selling decision quickly to reap the benefits of changing market conditions to provide maximum returns to their investors.

How to evaluate your Equity Mutual Funds

The key points to consider as an investor before making any investment in equity based mutual funds.

  • Investment goals and Risk tolerance.

One of the basic things to be taken into the consideration before making any investment decision on equity oriented mutual fund is whether, it’s meeting with the respective investor investment objective and risk tolerance. In case, an investor wants to earn capital gain more, then it’s better to choose an equity mutual fund where the money remains pooled for at least 12 months. But an investor must have a high-risk tolerance in case of making any investment in an equity fund.

  • Mutual Fund’s performance Consistency.

It’s one of the key things to take into consideration from an investor perspective. The consistency in the equity mutual fund returns, matters a lot before making any investment. Rather than looking how the funds return in past 1-2 year, it’s better to look how funds have performed over the past 5 years. It will provide a clear picture whether the fund will give consistent returns or just a whirlwind.

  • Fund Manager Experience.

Before investing, it’s quite pre-mandatory for the investor to look out for the fund manager experience. How long he/she has been in the industry and associated with the fund house. It’s also better to look his/her overall performance at the best of time and worst of time. It will be better to compare his/her performance with other fund managers.

  • Mutual Fund Expense.

Before evaluating any mutual fund, it’s better to look out for the expense factor. Since all the expense incurred in managing the mutual fund scheme is borne by the scheme. Thus, it’s better to look toward, how much proportions of the scheme are swayed by its expenses. Lower the ratio better will be the scheme.

Advantages of Equity Mutual Funds


Advantages of equity mutual funds are here:

  • Capital Appreciation – Equity mutual funds are popularly known to provide higher returns as compared to other funds, like Debt funds, thus, helping an investor generate huge wealth in the long-run.
  • Professional Expertise – Fund managers have good experience in managing portfolios and investors are assured that their hard-earned money is in safe hands.
  • Tax-Benefits – ELSS funds provide to its investors tax-benefits to the uplift of INR 1,50,000 under section 80C of the Income Tax Act.
  • Small Systematic Payments – Systematic Investment Plan (SIP) allow investors to deposit a nominal sum of money at regular intervals.
  • Liquidity – Most equity mutual funds (except ELSS) are liquid in nature, stating investors can withdraw their money according to their choice.

What are the key things to be considered as an Investor to invest in Equity Mutual Funds

There are certain things to be taken into consideration before investing in mutual funds.

  • Risk Appetite and period of investment.

Before investing in equity mutual fund, it’s better to evaluate the risk appetite. As most of the equity funds invest their funds in equity. There are high chances of volatility in the returns. So, it’s quite better to evaluate an equity fund, according to one’s risk appetite before investing. Time plays an important and key role. The larger the period of investment, the better will be the returns.

  • The Timing Factor.

An investor must look for the timing before investing. So, when is the best time to invest in mutual funds, when the market is in bull run or whether it’s in bear? For an intelligent investor both times are perfect. Investing in mutual fund requires discipline and practice. With the help of rupee cost averaging and SIP, if an investor buys less when the market is high and more when the market is low, then he/she can make decent returns irrespective of market conditions.

  • NAV: The crucial factor

NAV (Net Asset Value) is the key thing for making any mutual fund investment. NAV determines the present status of the mutual fund. If the NAV is consistent over a certain value at a certain time, then the equity fund is a good buy. While NAV does play a role, but it should not be the sole deciding factor for investment. There are certain other parameters to be taken care of before investing such as track record, fund management, volatility and portfolio returns.

What is the different type of tax on equity mutual funds

Any tax on equity mutual funds are based upon the profit and gains made by the investor in mutual funds, which is called as Capital gains. In India the taxes on any mutual fund is based upon the Capital gains. In a mutual fund, a differential rate of taxation is applied across various fund categories. But in the case of equity mutual, taxation is not only based on gains but also on holding period. The gains made on the equity oriented mutual fund held for less than a year are treated as short term capital gain and taxed at 15%. If the gains on equity oriented mutual fund held for a year or more are treated as long term capital gains and taxed approximately 10% in case gain exceeding Rs 1 lakh a year.

What is the Performance of Equity Funds in India

Equity funds are generally one of the top most performing categories of mutual fund. The equity funds deliver the highest returns in all the different categories. General trend shows that equity funds have generated returns in the range of 10-15% on an average basis in India. But overall the returns may fluctuate due to the market movements or other factor such as economy or political reasons. To get high returns, it’s better to choose the equity fund with utmost discipline and proper analysis. It will be better if the investor tracks the stock market closely and possess a key basic understanding of the market and its functionality.

Frequently Asked Questions


How to invest in Equity Funds

Lookin period of Equity Funds

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Attention Investor
Investments in Mutual fund & Securities Market are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund or designing a portfolio that suits your needs. Terms and conditions of the website are applicable.

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Mutual fund investments are subject to market risks, read all scheme documents carefully.

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