Diversified equity funds- How you can use them

 

Diversified equity funds in India strive to diversify their investments in entities throughout a vast range of market sectors, irrespective of size or market capitalization, i.e. large cap, mid cap or small cap companies. The sectors mostly include the likes of banking and financial services, pharmaceuticals, FMCG, IT, power and utilities, engineering, real estate, automobiles and so on. These diversified funds are slightly different from other types of equity mutual funds India. They aim at enabling long-term capital appreciation through diversified investing styles throughout the stock market.

Along with deploying investments in various sectors for lowering risks, they ensure good returns even during economically volatile periods. These funds are not regular equity fund investment options. They help in covering long-term objectives such as the weddings/higher education of kids, retirement and so on. These funds are offered by several mutual fund and insurance companies, other funds and ULIPs alike. Investors can profit from the economic upliftment of the company that they have chosen to invest in. Whenever any company achieves financial progress, a specific percentage of the gains will automatically be passed onto investors.

Diversified equity funds in India- Types and more

Diversified funds in this space are classified into various types:

• Small Cap Diversified Funds- They offer higher returns while being suitable for younger investors below the age of 35. They are ideal for those with high risk tolerance and should be managed well.
• Mid Cap Diversified Funds- These funds invest in entities with market capitalization hovering between Rs. 4,000 and 20,000 crore. The risk quotient is slightly lower as compared to small cap diversified funds. The returns are higher in the long haul.
• Large Cap Diversified Funds- They invest in companies with minimum market capitalization of Rs. 20,000 crore and upwards. Investors buy shares/stocks of leading blue chip entities with the Nifty as their benchmark index in this case. Investments in top global names ensure comparatively lower risks while getting decent returns over a sustained time period.

Diversified equity funds in India have several advantages. They are ideal for varied market capitalization levels and business sectors alike. While large cap and mid cap funds invest in particular market capitalizations, multi cap funds deploy investments throughout diverse market capitalizations. Investing in various market capitalizations and entities throughout varying sectors will help investors lower risks considerably. The risk quotient is certainly present but you can manage them better.

Your investments will be managed by professional fund managers and they will help you stay on track with your financial objectives. The expense ratio is deducted from the NAV and is a small charge that will allow you to tap into their expertise and judgment. Diversity in share prices is another major advantage. This makes it a good option for first-timers and beginners, looking to gain more market exposure. It also suits people with comparatively lower tolerance for risks.