Hello, welcome back. We have been discussing classification of mutual funds. We continue our discussion, we are discussing classification of mutual funds based on investment patterns. In the last video, we discussed about debt funds. This time In this video, we will discuss about equity funds. equity funds are mutual funds which invest primarily in the stock market.

That is the fund managers have equity stock funds, basically buy shares of different companies and create a portfolio. there let's take a look at one example of equity fund. We look at access long term equity fund. Look at the holding pattern 98% of the investment is in equities instead allocation, financials have 40 nearly 40% automobiles about 14% and you can see the rest of it. The top holdings are the companies listed here like TCS, HDFC, bank, kotak, Mahindra bank, etc. So, this is a typical example of equity fund.

Now, let's take a look at the different types of equity funds. Now, we will classify equity funds into classifications is the first one. Now, here are listed are the different types of equity funds, we will take a look at each of them in some details. However, we will not be using this classification in the later sections of this course. We first look at equity Dec seven schemes, ie LS s. Now, you may have also come across equity linked insurance schemes. They operate in a similar manner though the purpose first of the two are different.

Now, these are tax saving vehicles. Now, while saving tax you would be investing in equity instrument that is the biggest advantage of this. So, the equity investment is supposed to get you get higher returns and also get the benefit of tax saving. The biggest advantage of erasers is that this is the shortest locking period of just three years in India. Now normally now fixed income instruments like National Savings Certificate of return because Petra etc, they have a locking period of six to seven years. Now the e ir SS primarily invest in stocks.

So it is very important to check the portfolio that is invested in and before investing in the year SS under the most important guideline is that the past performance of a lesson is no guarantee of future earnings. So, please, money to study the portfolio very carefully and then make judgment whether to invest in the yellow SS or not. Next we look at sector funds. The sector funds concentrate the investments in a single sector. We have given a few examples. Now, for example, take reliance pharma fund lands pharma fund only buys shares of pharma industry.

Now, it is best to stay away from such funds. Because if you're investing in a sector fund, you're betting on a single sector, but you're also betting on very heavily on a few companies. If the companies do well, you get a good return. However, if the companies fail, then you lose most of your money. The sector Funds investment should be only considered if you have a well thought out strategy. However, here again past performance should not be taken as a guarantee because we have seen that In a particular sector, in one year, the return was Norland 5% and the next year returns minus 53%.

So, in mutual fund investments, our long term investment, so betting on short term in mutual funds can be very disastrous. The opposite of sectoral funds is equity diversified funds. Now, these funds invest in many sectors, they invest in large, small and medium sized companies. Now, it is very important to study the composition of the portfolio because the core portfolio will get you the benefits or the returns. So, it is very important to study the core composition of the portfolio of such funds. Next, we'll discuss global funds.

The global funds could be sectoral like, for example, gold funds. The gold funds will be investing in gold industry across the globe. Whether it can be in gold Mining or it can be gold, gold extraction companies or gold jewelry companies. Or it could be based on geography like a fund based on Brazil, etc. Or it could be thematic like emerging markets. For example, one of one such fund is HSBC emerging markets fund.

So the key party here is that these funds should never be part of your core portfolio. While we will use the classification we just studied for equity funds, we will more use the classification that we're going to study now. This classification of equity funds is based on the size of the company they are invested in. Now inside the company, we normally mean that if the company is more than 10, billions market capitalization, that is market capitalization is number of shares into the share price. So if it is more than 10 billion market capitalization, we say it's a large cap company. If the capitalization is Between 2,000,000,010 billion we call it a mid cap company.

And if that market capitalization is less than 2 billion we call it a small cap company. So, based on the type of company the mutual fund is invested in, we say it's a large cap mutual fund or a mid cap or a small cap mutual fund. So, large cap mutual funds invest in large cap companies. Similarly, mid cap and small cap mid mutual funds will invest in mid cap and small cap companies. Recently in India, the government has made it mandatory for the mutual fund houses to declare what kind of companies the mutual fund will invested and every mutual fund has to have a single theme on which they have to invest in that has to be declared upfront. Now the company now the mutual funds which invest in all the three type of companies that is large cap, mid cap and small cap, we call them the blended funds.

The blended funds basically invest in all three type of mutual funds So, we will use use use this classification mode while it is in the later part of the discussions on mutual funds. Thank you for watching See you in the next lecture.