Equity Mutual Funds: Types, Benefits & Ways of Investing

What Is the Meaning of Equity Mutual Fund?

What Are the Types of Equity Funds?

There are different types of equity funds, each of which offers a unique underlying portfolio with varying levels of risk. These funds can be broadly classified into the following:

Types of Equity Funds


Small-cap Funds

Small-cap equity funds predominantly invest in the stocks of small-cap companies. These are the companies that have a market capitalisation of less than ₹100 crore, with a ranking of or below 251. Although volatile in nature, a small-cap equity fund ensures significant returns in the long run.

Mid-cap Funds

This type of equity fund invests in stocks of mid-cap companies, which are listed between 101-250th according to market capitalisation. Mid-cap funds tend to offer higher returns than large-cap funds, albeit at a higher risk. Moreover, these funds are less risky as compared to small-cap funds.

Large-cap Funds

In the case of large-cap funds, the investment is made in the top 100 companies as per the market capitalisation. As a result, this kind of fund generally offers sustainable and stable returns over a period of time. Additionally, large-cap funds involve lower risk than mid-cap funds, which reflects in their returns.

Multi-cap Funds

As the name suggests, multi-cap funds invest in various large-cap, mid-cap and small-cap companies. As they invest in enterprises across market capitalisations and sectors, they allow the benefit of portfolio diversification. Furthermore, multi-cap equity funds reduce the amount of associated risk of an investment.

Thematic Equity Funds

These equity funds invest in the securities of particular sectors, such as banking service, information technology, pharma, etc. So, their performance depends on the overall performance of the funds’ respective sector. In addition, they come with higher risks and offer higher returns.

Equity Linked Savings Scheme (ELSS)

This is a fund that primarily invests in equity or equity-related instruments while offering tax benefits to investors. Investments in ELSS qualify for deductions up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961. Moreover, ELSS investments are subject to a lock-in period of 3 years.

How Do Equity Mutual Funds Work?

What Are the Benefits of Investing in Equity Mutual Funds?

Returns from Equity Mutual Funds


Given their high level of associated risk, equity mutual funds offer higher returns. Over a long-term investment horizon, the average return on equity mutual funds can touch 10%-12%, if not more!

For a clearer picture of equity mutual fund returns, take a look at the table below :


Name of the Fund

5-Year Returns

Mirae Asset Tax Saver Fund

22.66% p.a

Mirae Asset Emerging Bluechip Fund

21.88% p.a

Axis Midcap Fund

22.6% p.a

Parag Parikh Flexi Cap Fund

23.12% p.a

Quant Active Fund

25.07% p.a

Quant Tax Plan

25.65% p.a

*Data as on 21 October 2021 and is subject to change.

Who Should Invest in Equity Mutual Funds?

How to Invest in Equity Mutual Funds?

Points to Consider Before Investing in Equity Mutual Funds

Frequently Asked Questions