1. Diversified equity fund
An investment fund that contains a wide array of securities to reduce the amount of risk in the fund. Actively maintaining diversification prevents events that affect one sector from affecting an entire portfolio, make large losses less likely.
A diversified fund contrasts with specialized or focused funds, such as sector funds, which focus on stocks in specific sectors such as biotechnology, pharmaceuticals or utilities, or in particular regions such as Asia or Europe.
2. Sector funds
A stock mutual, exchange-traded or closed-end fund that invests solely in businesses that operate in a particular industry or sector of the economy. Because the holdings of this type of fund are in the same industry, there is an inherent lack of diversification associated with these funds.
These funds tend to increase substantially in price when there is an increased demand for the product or service offering provided by the businesses in which the funds invest. On the other hand, if there is a downturn in the specific sector in which a sector fund invests, the fund will often face heavy losses as a result of the lack of diversification in its holdings.
3. Equity Linked Savings Schemes (ELSS)
An ELSS is a kind of Mutual Fund and is similar to any diversified equity mutual fund in many ways. An ELSS gives a tax benefit and comes with a lock in period of 3 years. Investment avenues of an ELSS are a mix of various asset classes such as equity, debt, gold and real estate.
4. Equity Income/Dividend Yield
A type of mutual fund that invests in high-quality companies with a reliable history of dividend payments and growth in the dividend rate. In the mutual fund context, the investment objective will be a combination of generating both moderate current dividend income and moderate capital appreciation.
A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows:
5. Arbitrage Funds
a kind of hedged investment meant to capture slight differences in price; when there is a difference in the price of something on two different markets the arbitrageur simultaneously buys at the lower price and sells at the higher price.
6. Thematic funds
Thematic investing is about identifying global economic trends, driven by politics, culture, demographics or a combination of all three. The ‘core drivers’ behind most thematic investment funds are population growth, rising wealth in the developing world, natural resource scarcity, energy security and climate change.
