MUTUAL funds are an ideal investment vehicle you can use to invest in assets such as equities and fixed income.

There are a variety of equity schemes to satiate every investor's needs.

wealth familiarizes you with the equity funds family.

Equity diversified fund
-- This fund contains a wide array of stocks.

-- The fund manager maintains a high level of diversification (across sectors and industries) in its holdings, thereby reducing the amount of risk in the fund.

-- Most fund houses have internal guidelines for the maximum exposure a diversified fund can have in each industry as well as segment.

Index Fund
-- Its a passively managed fund that invests in the same stocks (and in the same proportion) that form a part of a benchmark index, such as the BSE Sensex or the S & P CNX Nifty.

-- Such funds mirror the performance of the index.

-- The offer document states the index that the fund would track as its benchmark.

-- Gives similar returns as that delivered by the index.

-- Downside of investing in an index fund is that you may have to give up earning above average returns that a good quality diversified fund can provide over the longer term.

Dividend Yield Fund
-- This fund invests in high dividend yielding shares.

-- The prices of dividend yield stocks are less volatile than growth stocks.

-- They offer the potential to earn good appreciation since high dividend payout means that there is enough cash generation in the business.

-- These funds entail medium risks and are ideal for investors who wish to diversify within the equity segment and require regular dividends.

Read:

• Investing in mutual funds
• Buy mutual funds, cheap
• Investing in equities

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