Even amateur investors today are aware of the several different kinds of mutual funds that one can invest in. What is more important, though, is to be able to accurately distinguish between different types of mutual funds in respect to one’s own financial needs, means and investment objectives. Once you have this much figured out, you will be able to narrow down your list to a handful of options, and make your final pick thereon. An important decision many investors find themselves having to make is whether to invest in an equity fund or an index fund. Here’s the lowdown on both.

2.  An Equity Fund is a mutual fund which
invests in equity securities. Another way
to put this is that an Equity Fund invests in
the stock (or share) market
 Index Fund is a theoretical collection of
assets that represent a specific market,
either wholly or partially

3.  Equity fund buys ownership (or ‘equity’)
in companies
 The fund’s manager deigns this as likely
to be profitable in accordance with his
shareholder’s requirements
 This is usually through the purchase of
stock in public companies that are listed
on the stock market

4.  Indexes can’t be invested in, obviously,
as they are only hypothetical, referential
tools
 However, an index fund is a fund which
aims to match the performance of a
given financial index, rather than surpass
it as is the method of equity funds.

5.  An equity fund is actively managed
 A designated fund manager makes
investment decisions for his clients
 As the fund manager or a financial
planner has the in-depth knowledge of
the market

6.  Index funds are relatively simpler to
operate, and do not warrant the need
for professional oversight
 the investors need to do is buy all of
those securities and assets that are listed
in the particular fund that they are
tracking

7.  Equity funds, because of their ambitious
nature, can be utilised for long term profits
 However, the equity business requires a
comparatively aggressive approach
 Whereas index funds are less ambitious
 That is why Index funds are less risky to invest
in

8.  In several cases, index funds may invest
in equity securities and equity funds may
also track a given financial index with
the object of mirroring its performance
 However, in both cases, the investment
will reap different results owing to the
managerial differences between equity
funds and index funds

9. Thank You
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