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Many people today are familiar with equity funds - funds that invest in equities, or, what’s commonly known as stocks. However, the term can also cause confusion, considering the various types that are available on the market - each serving a unique purpose. So, what are the various types of funds available to consumers, and how can you find one that’s right for your financial goals and needs?

To begin, it’s important to differentiate between equity funds and mutual or exchange-traded funds. Equity funds are usually held in stock or cash, as opposed to notes, bonds or other securities - which is typically the case with mutual or exchange-traded funds. The intention of an equity fund is capital growth over a long term, inclusive of dividends and interest, while other types of funds aim to achieve capital growth over a shorter amount of time. Specific funds of this type might also concentrate on a particular sector of the market, or may be tailored toward a certain level of risk.

Some of the various types of equity funds include: index funds, growth finds, value funds, and sector (specialised funds). An index fund invests in securities to mirror a market index, with minimum securities turnover. As a result, index funds generally have lower management costs than other types of funds. Growth funds, however, invest in company stocks that are growing rapidly and typically focus on generating capital gains rather than income. Value funds invest in “value” stocks, with the typical value fund clients being older, more established businesses that pay dividends.

And finally, sector funds track one area of industry, with a minimum of 25 per cent of a company’s assets invested in its specialty. This type of fund offers high appreciation potential, but may also pose a higher risk to the investor. Examples of sector funds include gold funds (gold mining stock), technology funds, and utility funds.

When considering investing in an equity fund, it’s always a good idea to equip yourself with knowledge on the options that are available to you, as well as what each option entails. However, one of the most effective ways to determine which type of equity fund is right for you is to speak with a qualified specialist. A specialist can ask you all the right questions with regard to your financial goals and needs - not to mention take into account important aspects of your business, such as its ‘cap’ size - to ultimately point you in the direction of a suitable fund investment option.

Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.