Equity mutual funds invest in stocks and are classified by market capitalization, investment style, sector/theme, and tax treatment. Large cap funds invest in top companies, while mid and small cap funds involve higher risk but also higher potential returns. Funds are also classified as active, index, sector, thematic, or international based on their investment approach. Choosing the right type of equity fund depends on an investor's goals, risk tolerance, and time horizon. Regular investment, portfolio diversification, and periodic review can help investors achieve superior long-term returns from equity mutual funds.

1. Types of Equity Mutual Funds in MF Industry
'High' Risk, 'Higher' Growth , 'Highest' Returns!

2. What Are Equity Mutual Funds?
• Equity Mutual Funds is a sub-category of mutual
funds which diversify the assets in the
equities/stocks of the companies.
• The margin of profit from the equity funds depends
upon the growth prospect of the company.
• Investing in equity mutual funds is a good choice for
the investors having:
1. Moderate to High Risk Appetite.
2. Long Term Investment Tenure.
3. Desire to Achieve High Returns in the Long Run.
• Equity Mutual Funds are Classified on the basis of
market capitalization, investment style,
sector/theme, and tax.

3. Classification of Equity Mutual Funds on the Basis of
Market Capitalization
On the basis of market capitalization, the equity mutual
funds are broadly divided into 4 types:
1. Large Cap Funds: Invests predominantly in the stocks of
the companies which are ranked between 1 to 100 in terms
of market capitalization. Invetsors should have moderate risk
appetite for investing in these funds.
2. Midcap Funds: Invests in companies falling between the
range of 101-250. Investors should have high risk appetite.
3. Small Cap Funds: Diversify the assets in the stocks of
companies which are ranked above 250. Very Risky Funds.
4. Multicap Fund: In order to provide market opportunities
across different market caps, the fund invests in a
combination of large cap, midcap, and small cap stocks.

4. Classification of Equity Mutual Funds on the Basis
of Investment Style
• An investment style refers to the philosophy
followed by the fund managers in managing the
fund's portfolio.
• Based on investment style, equity mutual funds are
of the following types:
1. Active Funds: The funds are actively managed by
the fund managers. The fund managers diversify the
assets in different equities according to the market
conditions.
2. Index Funds: Such funds replicates the portfolio of
the indexes such as BSE and NSE, and works on the
same foot works.

5. Classification of Equity Mutual Funds on the Basis
of Theme
• Sector Funds: These funds invests in a particular
sector of the Indian Economy, such as IT, Pharma,
Banking Sector, etc.
• Thematic Funds: Thematic funds invests in the
stocks based on a particular theme. Such funds
offers more diversification than the sectoral funds
as the stocks are choosen across different sectors.
• International Funds: As the name suggests, the
international funds allocates the assets in the
equities of foreign companies.
• Funds of Funds: FoFs invests in other mutual funds
without investing directly in the stocks/equities of
the companies.

6. Classification of Equity Mutual Funds on the Basis
of Tax
• Apart from long term capital appreciation, the
equity mutual funds also provide tax saving benefits
to the investors. Such funds are called as ELSS
(Equity Linked Savings Scheme) funds.
• ELSS: Such funds are listed as tax saving instruments
under Section 80C of Income Tax Law. Through
mutual fund investment in ELSS, an investor can
save up to Rs. 46,800* on an investment of Rs. 1.5
Lakh.

7. How to Choose the Best Category of Equity Mutual
Funds?
The choice of the best category of equity mutual funds
will depend on the following characteristics:
• Financial Goals: With more risk, comes superior
returns thus, an investor should choose the category
of mutual fund according to his financial goals.
Sectoral funds, thematic funds, small cap and midcap
funds require very high risk but can also help you to
achieve your financial goals early.
• Risk-Appetite: Know your risk appetite beforehand
and then park your cash in the category of mutual
funds.

8. How to Choose the Best Equity Mutual Funds?
For choosing the best equity mutual funds, an investor
should keep the following things in mind:
• Portfolio Allocation: Analyze the portfolio allocation and
sector allocation for determining the future growth
aspect of the fund. Make sure that the fund managers
have diversified the assets in the promising sectors.
• Past Performance: Track record of an equity mutual fund
will help you to determine the performance during
market volatility.
• Fund Managers: A fund manager plays an important role
in the performance of the fund. Thus, make sure that the
fund manager is experienced and have been associated
with the scheme for a longer period of time.

9. How to Achieve Superior Returns from Equity
Mutual Funds?
• Long Time Horizon: Investing for a longer period of
time will help to accumulate larger profits.
Moreover, it will also free the investors from the
worry of timing the market.
• Diversified Portfolio: Don't stick to just one
category of scheme. Instead, include a combination
of different types of schemes.
• Review Portfolio Timely: Never forget to review
your portfolio once in an year.
• Increase Invested Amount Timely: Through step-up
SIP you will able to achieve higher returns in the
long run.

10. Conclusion
Equity mutual funds is a category of mutual funds
having potential to provide excellent gains in the long
term. This category of mutual fund is further sub-
divided into other types on the basis of different
criteria. The presentation gives a detailed analysis of
all the types of equity mutual funds. Thus, choose the
best category of equity mutual fund according to your
suitability and take a step towards achieving your
financial goal.