14 Types of Equity Mutual Funds You should Invest Today

14 Types of Equity Mutual Funds You should Invest Today

Equity mutual funds are also referred to as equity funds or stock funds. They are a different type of mutual fund that people new to investing tend to be curious about.

There are several funds available in the market, but equity funds are considered to be the most popular type of mutual fund. Yet there are still a lot of things you’ll have to sort through once you learn what equity funds are.

14 Types of Equity Mutual Funds infographic

What is an Equity Mutual Fund?

An equity fund is actually a type of mutual fund that mainly invests in stocks. This is why it’s also commonly known as stock funds. It’s also considered as a private investment fund, such as a hedge fund. You can either manage it actively, or passively as an index fund. It normally acquires ownership in businesses in the form of publicly traded common stock.

You can normally categorize the stock mutual funds in various groups. These groups are the company size, the investment style of the holdings in the portfolio, and geography.

The size of the equity fund can be determined through a market capitalization. Investment style on the other hand can be seen in the fund’s stock holdings.

Another category you can use is to separate the domestic (U.S.) ones from internationals. These can be part of the broad market, regional or single country funds. There are also those equity funds that targets business sectors such as health care, commodities, and real estate.

There are equity funds of every type and characteristic available to meet every risk profile and investment objective that you might have.

Equity funds are available for particular market sectors such as technology and pharmaceutical. Specific stock exchanges like the New York Stock Exchange and Nasdaq are also available. Or those of a specific interest group such as political, religious, or brands. There are also those in foreign or domestic markets, high or low risk, and income or growth stocks.

You can also further divide equity stocks into those pursuing income or capital appreciation or both. Income funds focuses on dividend-paying stocks, usually equities of blue-chip companies.

Equity Mutual Funds as an Investment Vehicle

Equity funds are practical investments for most people. As an investment vehicle, equity funds are best suited to those who don’t have large amounts of capital for investment. This can also be good for those who are not as experienced in financial investing.

There are certain qualities that the equity funds have which makes it more attractive and suitable for small individual investors. One of these qualities is the reduction of risk as the result of a fund’s portfolio diversification. Another quality is the considerably small amount of capital one would need to acquire shares of an equity fund.

In normal circumstances, a large amount of investment capital would be needed for an individual investor to reach the similar degree of risk reduction through the portfolio diversification of direct stock holdings. But with pooling small investors’ capital, an equity fund will be able to diversify effectively. This can be achieved without requiring each investor to invest large capitals.

You can determine the price of the equity fund through the fund’s net asset value (NAV) less its liabilities. Having a more diversified fund means that the negative effect of an individual stock’s adverse price movement can be lessened. The overall portfolio and the share price of the equity fund won’t have to suffer through huge blows.

The past experiences of the equity fund’s professional portfolio manager are something shared to the public. The federal government heavily regulates the transparency and reporting requirements for equity funds.

The Different Types of Equity Mutual Funds

There are various types of equity funds currently available to investors.  These types are also broken down to various categories you can encounter throughout your investment journey.

Equity Mutual Funds Based on Geography

Domestic Equity Funds

The domestic equity funds refer to those that invest in stocks that are solely found in a home country. The home country of the investor and issuer has exclusive rights to this type of equity funds.

Global Equity Funds

The global equity funds refer to those that invest in stocks around the world. The distinctive factor in this type of equity fund is that it includes those in the United States. Despite this, at least 80 percent of their overall portfolio is made up of foreign stocks.

International Equity Funds

The international equity funds refer to those that invest in stocks that are only outside of the United States.

Worldwide Equity Funds

The worldwide equity funds refer to those that invest in stocks around the world. What separates this type of equity fund from the others is that it doesn’t differentiate between domestic or international assets. Investors merely follow the portfolio manager’s directions or what the methodology dictates.

Investor studying data about a company

Equity Mutual Funds Based on Market Capitalization

Micro Cap Equity Funds

The micro-cap equity funds refer to those that invest in tiny publicly traded companies. These companies are usually worth a few million or few tens of millions of dollars in market capitalization.

Small Cap Equity Funds

The small cap equity funds refer to those that invest in companies considered to have small market capitalization.

Mid Cap Equity Funds

The mid cap equity funds refer to those that invest in companies considered to have medium sized market capitalization.

Large Cap Equity Funds

The large cap equity funds refer to those that invest in companies considered to have large sized market capitalization.

Mega Cap Equity Funds

The mega cap equity funds refer to those that invest in the stocks of the biggest companies across the globe. These companies include the companies worth multiple billion dollars such as Wal-Mart and Berkshire Hathaway.

Equity Mutual Funds Based on Investing Style

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Dividend Growth Funds

The dividend growth funds refer to those that invest in business ownerships. The businesses are normally those which are known for increasing dividends per share at a faster pace compared to the stock market as a whole.

There are plenty of known ways to make money using a dividend growth strategy. The strategy will sometimes allow them to surpass their higher-yielding counterparts. There are also cases when these funds make wonderful buy-and-hold investments.

Equity Income Funds

The equity income funds refer to those that invest in ownership of business that pay a weighty amount of dividend. This can usually be measured through the history of dividend increases. Additionally, you can use the absolute and relative dividend yield and the conservative dividend coverage ratios as reference for measurement.

Index Equity Funds

The index equity funds refer to those that invest in the mimicry of an index. This fund might mimic the likes of Dow Jones Industrial Average or the S&P 500. Though it’s not always the case, index equity funds usually have the lowest mutual fund expense ratios.

Private Equity Funds

The private equity funds refer to those that invest in privately held companies and don’t trade on the stock market. These companies are usually set-up as a limited liability company. Once established, the company will be infused with millions, or even billions, of dollars. They are capable of raising money by issuing bonds and acquisitions of businesses the management believes it can develop.

Sector or Industry Specific Equity Funds

The sector or industry specific equity funds refer to those that keep track of specific areas of the economy. These areas include industries and sectors, such as discount retailers or property and casualty insurance groups. This may appeal to investors who wish to invest only in certain types of businesses.

How to Invest in Equity Mutual Funds

Upon making the decision to invest in equity funds, there are several options you can choose from. Here are four of them.

  1. You can choose to invest by opening an account directly with a mutual fund family.
  2. Use a brokerage account to invest in equity mutual funds. Then, you can buy shares of the equity fund.
  3. You can also invest in equity mutual funds by buying shares in a different way. You can use your 401(k) or 403(b) plan from work.
  4. Lastly, you can open a Roth IRA or Traditional IRA at a brokerage firm. You can then use this to buy shares of an equity mutual fund.


The equity mutual fund might not be as widely-known as other types of investment but it’s not something to ignore. There are numerous other factors you should consider when deciding to invest in this type of mutual funds.

You should also familiarize yourself with mutual funds as a whole in order to fully understand what you’re investing in. Mutual funds have a vast selection of funds available in the market. Regardless, equity funds take home the crown for being the most popular type.

There are several types of equity mutual funds you can choose from no matter what you might be interested in. You just have to invest enough time for some research in order to make the best out of your investment.

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