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    What is an equity mutual fund?

    Synopsis

    A mutual fund scheme must invest at least 65% of its corpus in Indian stocks (or equity and equity-related investments) to be treated as an equity mutual fund for the purpose of taxation.

    iStock
    An equity mutual fund invests mostly in equity or stocks. In India, a mutual fund scheme must invest at least 65% of its corpus in Indian stocks or equity and equity-related investments to be treated as an equity mutual fund for the purpose of taxation. This is the reason why even though international funds invest mostly in stocks, they are not treated as equity mutual funds for taxation. Since they do not invest in Indian stocks, they are taxed like debt schemes.

    The equity mutual fund has so many categories. As per Sebi norms, there are around 10 equity mutual fund categories. They are:

    Multi cap funds: These schemes can invest across sectors and market capitalisation like large cap, mid cap, small cap, and so on.

    Things You should consider
    • Annualized Return
      for 3 year: 0.64%
    • Suggested Investment
      Horizon: >3 years
    • Time taken to double
      money: N.A
    Things You should consider
    • Annualized Return
      for 3 year: 2.04%
    • Suggested Investment
      Horizon: >3 years
    • Time taken to double
      money: 9.5 Years
    Large cap funds: These schemes have the mandate to invest at least 80% of the assets in large cap companies or top 100 companies by market capitalisation.

    Large & mid cap funds: These schemes have the mandate to invest at least 35% of their assets in large cap stocks, and 35% in mid cap stocks.

    Mid cap funds: These funds must invest at least 65% of their assets in mid cap stocks, defined as companies that are ranked between 101 and 250 in terms of their market capitalisations.

    Small cap funds: These funds must invest at least 65% of their assets in stocks of small cap companies, defined as companies that are ranked below 251 in terms of their market capitalisations.

    Dividend yield fund: These funds have the mandate to invest at least 65% of their assets in dividend yielding stocks.

    Value funds: These schemes must invest at least 65% of their assets in stocks based on value investing principles.

    Contra funds: These funds must follow a contrarian investment strategy and invest 65% of their assets in stocks based on the strategy.

    Focussed funds: These funds must invest in a portfolio of maximum 30 stocks. Most of the focused funds follow a multi cap strategy.

    Sectoral or thematic funds: These schemes must invest at least 80% of their assets in a dedicated sector or theme.

    ELSS funds: Equity Linked Saving Schemes or tax saving mutual funds have a mandatory lock-in period of three years. Investments in these schemes qualify for tax deductions of up to Rs 1.5 lakh under Section 80C.


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