Although an equity fund is merely a fund that invests in stocks, there are different types of equity fund types to invest in. To choose an equity fund that is right for you effectively, it ‘s vital that you understand these different types of equity funds first. Checkout Touchstone Funds.
Some of the various types of equity fund types available to investors include: growth fund, value fund, index fund, sector fund, revenue fund, balanced fund and asset allocation fund. What’s more, the way each fund type works and the results it delivers is different from the next.
In the end, it’s wise to make an informed decision when it comes to investing in any kind of fund.
When a lot of people look to invest, they are drawn to do so with fast-growing companies. There is a Growth Fund for these investors. Growth companies tend to reinvest significant amounts of their profits for research and development , and support investments based on capital gains rather than revenue generation.
On the other hand, value funds invest in “value” stocks-stocks with firms that are usually older and more established. These types of funds tend to be more stable, but usually do not demonstrate the rapid growth fund movements. Another type of investment in the fund-the index fund-follows a market index instead of being actively managed. This type of fund has a low management fee but normally also has a minimum securities turnover.
In the meantime, sector funds invest in a specific area of an industry-such as gold or technology funds-and offer high potential for appreciation. Such equity funds, however, may also pose an increased risk to the investor.
Another type of investment in equity is in relation to the income fund. Income funds focus on current revenue over growth-an objective that can be achieved by investing with companies with a proven dividend payment history. However, the balanced fund invests in income bonds, and appreciation stocks. Asset allocation funds divide investment into income stocks, growth stocks and money or cash instruments. Then, advisors and fund managers switch the percentage of und holdings in each category based on the performance of that group.