India Equity: Types of equity mutual funds available for investments

On June 1, 2018, investing in equity mutual funds in India got a tad easier thanks to a directive on scheme categorization (or recategorisation) to all Asset Management Companies (AMCs) by India’s capital markets regulator Securities and Exchange Board of India (SEBI).

SEBI’s rule meant that now every AMC will have one fund per category and not multiple funds like before. So within each AMC, there will be only one large cap fund, one mid cap fund, one small cap fund, one multicap fund and so on. While quite a few fund houses introduced many categories as a legitimate business response to this change, the move has helped in better decision making: 

- Each scheme category because of its inherent exposure or style, carries a specific risk-reward ratio. The categorization rule defines the minimum adherence needed. So based on what one’s financial and life plans, one’s risk appetite dictate, one can choose the appropriate type of fund. 

Below are the various equity fund categories:

EQUITY SCHEMES

Multi Cap Fund: 

- Minimum  investment  in equity & equity related instruments: 65% of total assets

Large Cap Fund

- Minimum  investment  in equity & equity related instruments of large cap companies: 80% of total assets

Large & Mid Cap Fund

- Minimum  investment  in equity & equity related instruments: large cap companies: 35% of total assets, mid cap stocks 35% 

Mid Cap Fund

- Minimum  investment  in equity & equity  related instruments  of mid cap companies: 65% of total assets

Small cap Fund

- Minimum  investment  in equity & equity related instruments of small cap companies: 65% of total assets

Dividend  Yield Fund

- Scheme  should predominantly invest in dividend yielding stocks.
Minimum investment in equity: 65% of total assets

Value Fund

- Scheme  should follow   a value investment strategy. Minimum investment in equity & equity related instruments: 65% of total assets

Contra Fund

- Scheme should follow a contrarian investment strategy. Minimum investment in equity & equity related instruments: 65% of total assets

Focused Fund

- A scheme focused on the number of stocks (maximum 30) Minimum investment in equity & equity related instruments: 65% of total assets

Sectoral/Thematic

- Minimum  investment  in equity & equity related instruments of a particular sector/ particular theme: 80% of total assets

ELSS

- Minimum  investment  in equity & equity related instruments: 80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance)

Index  Funds/ETFs

- Minimum investment in securities of a particular index (which is being replicated/ tracked): 95% of total assets

FoFs (Overseas/ Domestic)

- Minimum  investment   in the underlying fund: 95% of total assets

Retirement Fund

- Scheme having a lock-in for at least 5 years or till   retirement age whichever is earlier

Children’s Fund

- Scheme having a lock-in for at least 5 years or till the child attains age of majority whichever is earlier.

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Note: Connected to India articles on NRI personal finance are intended to help Non-Resident Indians (NRIs) understand the increasingly complex world of financial investments. It is not a solicitation, recommendation, endorsement, of any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

 

Author
N. Vishwanath
N. Vishwanath – Contributor

N. Vishwanath is the Mumbai-based principal financial planner at Blue Ocean Financial Services. He is also a Statistics Graduate from Mumbai University, a Certified Financial Planner CM and a Certified Private Wealth Manager (from Centre for Investment Education & Learning).

He keeps himself up to speed with the latest trends and best practices followed across the globe, by consistently attending, planning related conventions in the US, learning award-winning methodologies and newer ways of engaging. Vishwanath has been attending the AGM of Berkshire Hathaway for the last few years now. His idol is Charlie Munger and Benjamin Franklin. Vishwanath has contributed to articles in ET Wealth (A weekly Wealth Edition of The Economic Times) and Live Mint (A financial daily). 

Vishwanath is a tennis player, swimmer, yoga practitioner, a has-been book collector now actively morphing into a voracious book reader.

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