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Equity Mutual Funds

Equity mutual funds invest pooled amounts of money in stocks of public companies. They aim to increase the value of companies over time. Fund managers employ different styles such as value, growth, or a combination when picking stocks. Balanced funds buy a combination of stocks, bonds, and short-term bonds to provide growth and income while avoiding excessive risk. Growth funds aim for capital appreciation by investing in fast-growing companies, which are more volatile. No-load mutual funds can be purchased without commission, while load funds charge commission upon purchase or redemption. Exchange traded funds represent baskets of securities traded on an exchange that aim to achieve the same return as a market index.

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149 views3 pages

Equity Mutual Funds

Equity mutual funds invest pooled amounts of money in stocks of public companies. They aim to increase the value of companies over time. Fund managers employ different styles such as value, growth, or a combination when picking stocks. Balanced funds buy a combination of stocks, bonds, and short-term bonds to provide growth and income while avoiding excessive risk. Growth funds aim for capital appreciation by investing in fast-growing companies, which are more volatile. No-load mutual funds can be purchased without commission, while load funds charge commission upon purchase or redemption. Exchange traded funds represent baskets of securities traded on an exchange that aim to achieve the same return as a market index.

Uploaded by

Honey Ali
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© © All Rights Reserved
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EQUITY MUTUAL FUNDS

Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest
pooled amounts of money in the stocks of public companies.

Stocks represent part ownership, or equity, in companies, and the aim of stock ownership is
to see the value of the companies increase over time. Stocks are often categorized by their
market capitalization (or caps), and can be classified in three basic sizes: small, medium, and
large. Many mutual funds invest primarily in companies of one of these sizes and are thus
classified as large-cap, mid-cap or small-cap funds. Equity fund managers employ different
styles of stock picking when they make investment decisions for their portfolios. Some fund
managers use a value approach to stocks, searching for stocks that are undervalued when
compared to other, similar companies. Another approach to picking is to look primarily at
growth, trying to find stocks that are growing faster than their competitors, or the market as a
whole. Some managers buy both kinds of stocks, building a portfolio of both growth and
value stocks.

BALANCED FUND

Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a
combination of common stock, preferred stock, bonds, and short-term bonds, to provide both
income and capital appreciation while avoiding excessive risk.
Balanced funds provide investor with an option of single mutual fund that combines both
growth and income objectives, by investing in both stocks (for growth) and bonds (for
income). Such diversified holdings ensure that these funds will manage downturns in the
stock market without too much of a loss. But on the flip side, balanced funds will usually
increase less than an all-stock fund during a bull market

GROWTH FUNDS
Growth funds are those mutual funds that aim to achieve capital appreciation by investing in
growth stocks. They focus on those companies, which are experiencing significant earnings
or revenue growth, rather than companies that pay out dividends.

Growth funds tend to look for the fastest-growing companies in the market. Growth managers
are willing to take more risk and pay a premium for their stocks in an effort to build a
portfolio of companies with above-average earnings momentum or price appreciation.In
general, growth funds are more volatile than other types of funds, rising more than other
funds in bull markets and falling more in bear markets. Only aggressive investors, or those
with enough time to make up for short-term market losses, should buy these funds.

NO-LOAD MUTUAL FUNDS

Mutual funds can be classified into two types - Load mutual funds and No-Load mutual
funds. Load funds are those funds that charge commission at the time of purchase or
redemption. They can be further subdivided into (1) Front-end load funds and (2) Back-end
load funds. Front-end load funds charge commission at the time of purchase and back-end
load funds charge commission at the time of redemption.

On the other hand, no-load funds are those funds that can be purchased without commission.
No load funds have several advantages over load funds. Firstly, funds with loads, on average,
consistently under perform no-load funds when the load is taken into consideration in
performance calculations. Secondly, loads understate the real commission charged because
they reduce the total amount being invested. Finally, when a load fund is held over a long
time period, the effect of the load, if paid up front, is not diminished because if the money
paid for the load had invested, as in a no-load fund, it would have been compounding over
the whole time period.

EXCHANGE TRADED FUNDS

Exchange Traded Funds (ETFs) represent a basket of securities that are traded on an
exchange. An exchange traded fund is similar to an index fund in that it will primarily invest
in the securities of companies that are included in a selected market index. An ETF will
invest in either all of the securities or a representative sample of the securities included in the
index. The investment objective of an ETF is to achieve the same return as a particular
market index.

Exchange traded funds rely on an arbitrage mechanism to keep the prices at which they trade
roughly in line with the net asset values of their underlying portfolios.

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