Impact Equity Fund – Different Types

Business

This is an era of investment drived by knowledge. There is a wide variety of equity funds (EF)/stock funds (SF) available to invest. In North America there are 10,000 + MFs; unless one knows the type and purpose of the funds, he / she will not be able to choose the one that is suitable for her. One must evaluate his / her investment purpose, and find out which type of MF will serve the purpose appropriately. Check Touchstone Sustainability & Impact Equity Fund.

What are Funds for Equity?

Equity funds invest in stocks of companies. All the funds, however, do not invest in similar stocks or in the same proportion in the different stocks. An EF ‘s character depends on the nature of the stocks that it invests in, and its goals. The equity funds invest predominantly in large- and small-cap stocks. Some equity funds invest in a predetermined proportion in both big and small cap companies.

Purpose

Since the nature of the assets invested in are stocks, it is evident that the primary objective of those funds is long-term capital appreciation.

Hazard profile

Equity funds are characterised by “high performance risk.”

Examples include

Rydex Series Trust Consumer Products Fund, Brown Vanguard Equity Income Fund, Direxion Daily Gold Miners Bear 3x Shares, Global Diversified Investment Grade Income Trust II and so on.

The selection of stocks to build the portfolio of the fund is called style of investment. Generally we find three types of mutual funds, depending on the investment style.

Now let’s look at the different types of available stock funds-

Value Investment: These EFs invest in stocks with strong fundamentals but which are out of steam at the moment.

The selection criteria for stocks:

  • The P / E ratio is low
  • Low Booking Value
  • High yield dividend ratio.

Examples: Brown Vanguard Equity Income Fund, American Beacon Bridgeway Large Cap Value Fund, Large Cap Value Equity Portfolio, Delaware Pooled Trust

Growth Investment: These funds invest in fast-growing businesses that are part of rapidly expanding industries.

The selection criteria for stocks:

  • Top P / E ratio
  • Ratio with high sales growth
  • Book value ratio: High price
  • Riesling cash flow
  • Low return on dividends