What are the various types of equity?
Where to invest in Stock Market?
Mutual funds that are available for Retail investors?
and much more.
You’ve finally gathered the courage to get started investing in any mutual funds or stocks but you’re tired of letting your money sit in fixed deposits where it’s growing at a meager five percent per annum recently
The Stock market grew by the same five percent two days after the budget was announced naturally you want to get in on the action but what if you’re someone
Who doesn’t understand the head or tail of the stock market what if you don’t know how to evaluate companies read candlestick patterns but more
What is equity?
What if you’re someone who doesn’t have the time or the patience to do all of these things well to address this exact same problem we have something called equity.
How Equity Mutual Funds work?
Imagine you have a friend who is very good at picking stocks I am sure all of us know someone or the other who is very good at picking stocks.
and has made a sizable amount of money through investing in the stock market So, imagine you go to this friend and ask him to invest some money on your behalf, and in exchange,
you pay him a fixed amount as a fee so now let’s say 10 other people
also have the same arrangement as him this is precisely how a mutual fund operates except the number of people runs into Lacs or Crore.
Types of equity mutual funds?
Types of equity mutual funds available to retail investors?
Where to invest money to get good return?
Firstly, We have to learn about
Large Cap Mutual Funds?
What are Large Cap mutual funds?
What are Large Cap companies?
How Large Cap Funds work?
Large Cap are those mutual funds that invest 80 percent of their assets in Large-Cap companies so large-cap
companies are the top 100 companies by size in India.
Mid Cap mutual funds:
What are Mid Cap mutual funds?
What are Mid Cap companies?
How Mid Cap Funds work?
Mid Cap funds as the name suggests are those Equity mutual funds that Invest 65 percent of their money in Mid Cap companies so Mid Cap
Companies are the 101st to the 250th largest companies in India by size.
Small Cap Mutual funds:
What are Small Cap mutual funds?
What are Small Cap companies?
How Small cap Funds work?
Small Cap funds as the name suggests again are those funds that Invest 65 percent of their money in the Small Cap Companies.
All the companies that are smaller than the 250th largest company in India now this is a huge list almost 95 percent of the companies in India fall under this.
Multi Cap Mutual funds:
Which mutual funds guarantee a safe investment?
What are Multi cap companies?
What is Multi Cap mutual funds?
How Multi Cap Funds work?
Multi Cap mutual funds are those funds that invest across all the three categories of companies we just talked about
- Large Cap Companies.
- Mid Cap Companies.
- Small Cap Companies.
Investors allocate about 25 percent of their money toward each of these different categories
How to invest money to make money without any risk?
Among all the equity mutual funds that we’ve talked about so far the Large Cap funds have the least risk
because they invest in the top 100 companies in India.
Which mutual has Higher Return Rate?
First Small Cap funds have the highest risk because they invest in smaller companies but the important Second thing to note here is
that the growth potential of smaller companies is much higher than that of larger companies so, you can expect higher returns in a
Small Cap Mutual Funds So, if you want to invest money to get good returns you can invest in Small Cap but remember it has Higher risk.
Thematic mutual funds:
What are Thematic Mutual Funds?
How Thematic Mutual Funds Work?
What are Thematic companies?
These are those funds that invest only in the stocks of companies that belong to a particular industry
some of the sub-categories within the thematic fund are
- I.T ( Information Technology).
- Pharmaceutical.
- Finance.
- Infrastructure, etc.
Which mutual Funds has higher risk rate?
So now since these funds invest only in a Particular Sector the Risk is Very high so if a particular sector does not perform well in a given year.
Then the thematic funds of that particular sector will also NOT perform well.
ELSS ( Equity Linked saving scheme):
Which mutual funds can save tax
When to invest for saving tax
How does ELSS work?
What is ELSS?
That is the Equity Linked savings scheme. These funds are precisely like some of the funds we discussed earlier the only difference is that there is.
A lock-in period of three years
So, these funds are top-rated during the END of the year when we file our tax returns so the tax advantage.
Funds offer is that under section 80c you can save up to 1.5 lakhs by investing in these funds.
Also, Since your Money is locked in for three years it gives a lot of flexibility to the fund manager to take a more aggressive stance in his investment strategy thereby giving you better returns now.
Index funds
What are index funds?
What index funds track the dow?
Which index funds to buy?
All the equity mutual funds that we talked about so far are actively managed meaning there is a fund manager and a team of
Research analysts (If you want to become a Financial Analyst click for some tips) who are actively monitoring the performance of your stocks and changing as needed because of this the expense ratio and annual management fee are very high for actively managed funds
So, index funds are an example of a passively managed fund
So, index funds are those funds that closely track the performance of popular indices such as the Sensex or the nifty.
What does Sensex Indicate?
The Sensex represents the performance of the top 30 companies in India.
What does Nifty Indicate?
The Nifty represents the performance of the top 50 companies in India.
Which funds have Lowest expense ratio?
Whereas Index Funds, in essence, index funds would mimic the performance of the top 30 of the top 50 companies in India
So, Now you don’t need a fund manager to actively monitor the performance of the top 30 of the top 50 companies in India there is typically an autopilot setup.
Where in the composition of an index fund dynamically changes as per the top 30 of the top 50 companies in India due to this
the expense ratio of an index fund is very low usually, one-tenth of the expense ratio of an actively managed fund.
Where should beginners Invest?
Best funds for beginners?
Which funds are best and safe?
So, all the other equity mutual funds that we talked about earlier try to beat the index fund because
the Index funds are the benchmark standard of the performance of the Indian Stock Market So, all the funds would try to beat the index fund but so index funds are much safer and less expensive.
Where to Invest Actively Managed Funds or Passively Managed Funds?
Many times, what happens is that the Actively managed funds are not able to win the Passively managed Funds
But remember you’re paying a higher expense ratio for the actively managed funds over a period of 10 or 15 years the difference in this expense ratio usually runs into lakhs so when you’re
just getting started with investing and you’re unsure of how sto pick an actively managed fund it is generally a good practice to invest in both an actively managed fund and a passively managed fund
So, you can compare the returns of both these funds this will give you an idea of whether it was worth the time and effort to invest in an actively managed fund.
Which funds to invest in developing countries?
So, in developing economies such as India, Sri Lanka, Bangladesh, Pakistan and etc. it is easier for an actively managed fund to beat a passively managed fund because that follows the index.
Which funds to invest in developed countries?
Whereas in a developed economy such as the U.S, it is not so barely 10 percent of actively managed funds are able to beat the index in the U.S. Hence, it’s better to invest in Passively Managed Funds
While developing countries like India, Sri Lanka, Bangladesh, Pakistan, etc. economy it would be prudent of us to have a sizeable portion of our portfolio in actively managed funds.
Conclusion:
If you have read it with small attention now you can easily know in which fund to invest without worrying that you are a beginner so please share your feedback in the comments as well with your way of investing.
What are the various types of equity?
Where to invest in Stock Market?
Mutual funds that are available for Retail investors?
and much more.
You’ve finally gathered the courage to get started investing in any mutual funds or stocks but you’re tired of letting your money sit in fixed deposits where it’s growing at a meager five percent per annum recently
The Stock market grew by the same five percent two days after the budget was announced naturally you want to get in on the action but what if you’re someone
Who doesn’t understand the head or tail of the stock market what if you don’t know how to evaluate companies read candlestick patterns but more
What is equity?
What if you’re someone who doesn’t have the time or the patience to do all of these things well to address this exact same problem we have something called equity.
How Equity Mutual Funds work?
Imagine you have a friend who is very good at picking stocks I am sure all of us know someone or the other who is very good at picking stocks.
and has made a sizable amount of money through investing in the stock market So, imagine you go to this friend and ask him to invest some money on your behalf, and in exchange,
you pay him a fixed amount as a fee so now let’s say 10 other people
also have the same arrangement as him this is precisely how a mutual fund operates except the number of people runs into Lacs or Crore.
Types of equity mutual funds?
Types of equity mutual funds available to retail investors?
Where to invest money to get good return?
Firstly, We have to learn about
Large Cap Mutual Funds?
What are Large Cap mutual funds?
What are Large Cap companies?
How Large Cap Funds work?
Large Cap are those mutual funds that invest 80 percent of their assets in Large-Cap companies so large-cap
companies are the top 100 companies by size in India.
Mid Cap mutual funds:
What are Mid Cap mutual funds?
What are Mid Cap companies?
How Mid Cap Funds work?
Mid Cap funds as the name suggests are those Equity mutual funds that Invest 65 percent of their money in Mid Cap companies so Mid Cap
Companies are the 101st to the 250th largest companies in India by size.
Small Cap Mutual funds:
What are Small Cap mutual funds?
What are Small Cap companies?
How Small cap Funds work?
Small Cap funds as the name suggests again are those funds that Invest 65 percent of their money in the Small Cap Companies.
All the companies that are smaller than the 250th largest company in India now this is a huge list almost 95 percent of the companies in India fall under this.
Multi Cap Mutual funds:
Which mutual funds guarantee a safe investment?
What are Multi cap companies?
What is Multi Cap mutual funds?
How Multi Cap Funds work?
Multi Cap mutual funds are those funds that invest across all the three categories of companies we just talked about
- Large Cap Companies.
- Mid Cap Companies.
- Small Cap Companies.
Investors allocate about 25 percent of their money toward each of these different categories
How to invest money to make money without any risk?
Among all the equity mutual funds that we’ve talked about so far the Large Cap funds have the least risk
because they invest in the top 100 companies in India.
Which mutual has Higher Return Rate?
First Small Cap funds have the highest risk because they invest in smaller companies but the important Second thing to note here is
that the growth potential of smaller companies is much higher than that of larger companies so, you can expect higher returns in a
Small Cap Mutual Funds So, if you want to invest money to get good returns you can invest in Small Cap but remember it has Higher risk.
Thematic mutual funds:
What are Thematic Mutual Funds?
How Thematic Mutual Funds Work?
What are Thematic companies?
These are those funds that invest only in the stocks of companies that belong to a particular industry
some of the sub-categories within the thematic fund are
- I.T ( Information Technology).
- Pharmaceutical.
- Finance.
- Infrastructure, etc.
Which mutual Funds has higher risk rate?
So now since these funds invest only in a Particular Sector the Risk is Very high so if a particular sector does not perform well in a given year.
Then the thematic funds of that particular sector will also NOT perform well.
ELSS ( Equity Linked saving scheme):
Which mutual funds can save tax
When to invest for saving tax
How does ELSS work?
What is ELSS?
That is the Equity Linked savings scheme. These funds are precisely like some of the funds we discussed earlier the only difference is that there is.
A lock-in period of three years
So, these funds are top-rated during the END of the year when we file our tax returns so the tax advantage.
Funds offer is that under section 80c you can save up to 1.5 lakhs by investing in these funds.
Also, Since your Money is locked in for three years it gives a lot of flexibility to the fund manager to take a more aggressive stance in his investment strategy thereby giving you better returns now.
Index funds
What are index funds?
What index funds track the dow?
Which index funds to buy?
All the equity mutual funds that we talked about so far are actively managed meaning there is a fund manager and a team of
Research analysts (If you want to become a Financial Analyst click for some tips) who are actively monitoring the performance of your stocks and changing as needed because of this the expense ratio and annual management fee are very high for actively managed funds
So, index funds are an example of a passively managed fund
So, index funds are those funds that closely track the performance of popular indices such as the Sensex or the nifty.
What does Sensex Indicate?
The Sensex represents the performance of the top 30 companies in India.
What does Nifty Indicate?
The Nifty represents the performance of the top 50 companies in India.
Which funds have Lowest expense ratio?
Whereas Index Funds, in essence, index funds would mimic the performance of the top 30 of the top 50 companies in India
So, Now you don’t need a fund manager to actively monitor the performance of the top 30 of the top 50 companies in India there is typically an autopilot setup.
Where in the composition of an index fund dynamically changes as per the top 30 of the top 50 companies in India due to this
the expense ratio of an index fund is very low usually, one-tenth of the expense ratio of an actively managed fund.
Where should beginners Invest?
Best funds for beginners?
Which funds are best and safe?
So, all the other equity mutual funds that we talked about earlier try to beat the index fund because
the Index funds are the benchmark standard of the performance of the Indian Stock Market So, all the funds would try to beat the index fund but so index funds are much safer and less expensive.
Where to Invest Actively Managed Funds or Passively Managed Funds?
Many times, what happens is that the Actively managed funds are not able to win the Passively managed Funds
But remember you’re paying a higher expense ratio for the actively managed funds over a period of 10 or 15 years the difference in this expense ratio usually runs into lakhs so when you’re
just getting started with investing and you’re unsure of how sto pick an actively managed fund it is generally a good practice to invest in both an actively managed fund and a passively managed fund
So, you can compare the returns of both these funds this will give you an idea of whether it was worth the time and effort to invest in an actively managed fund.
Which funds to invest in developing countries?
So, in developing economies such as India, Sri Lanka, Bangladesh, Pakistan and etc. it is easier for an actively managed fund to beat a passively managed fund because that follows the index.
Which funds to invest in developed countries?
Whereas in a developed economy such as the U.S, it is not so barely 10 percent of actively managed funds are able to beat the index in the U.S. Hence, it’s better to invest in Passively Managed Funds
While developing countries like India, Sri Lanka, Bangladesh, Pakistan, etc. economy it would be prudent of us to have a sizeable portion of our portfolio in actively managed funds.
Conclusion:
If you have read it with small attention now you can easily know in which fund to invest without worrying that you are a beginner so please share your feedback in the comments as well with your way of investing.
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