Equity Oriented Mutual Funds

A new investor into equities can and should start by investing in Equity Markets (Capital Markets) through Mutual Fund schemes. This is simplest form of investment into equity.

The advantage here is given fund has dedicated fund manager and skilled financial analyst to do research and identify good growth oriented companies with good fundamentals. Thus taking out the risk of lack of knowledge on financial parameters. Hence they become comparatively less riskier instruments than direct equity investments. Besides by buying a single fund it will provide exposure to various companies at a time on pro-rata basis against fund size thus providing diversification and cutting risk of having exposure to a single company. The returns provided may be bit lesser than direct equity investment as operational charges like asset management charges, admin charges etc recovered from the returns earned.

There are various flavor available in Equity Mutual Funds like sectoral funds, diversified funds, balanced funds, hybrid fund, index funds etc. In future post I will try to cover some of these flavors and their overall objectives etc.

Mutual Funds are also known as actively managed funds run under supervision of fund managers. Mutual funds can be bought or sold through fund houses / asset management companies directly or through agents. Returns provide will be in range of 10 - 15% CAGR over 10+ years, less riskier than direct equity investment but cost inefficient when compared to direct equity / passively managed funds.