About Equity Funds

Before you decide to invest in equities, you should understand three things:
$ What equities are
$ What equities' risk are
$ How owning them may fit into your financial plan


What is an Equity Fund? Fr: Wikipedia
This is a fund that invests in equities more commonly known as stocks. Stock funds are contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other equities. This may be a mutual fund or exchange-traded fund.

The objective of an equity fund is long-term growth through capital gains, although historically dividends have also been an important source of total return. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk.

Stock funds can be distinguished by several properties. Funds may have a specific style, for example, value or growth. Funds may invest in solely the securities from one country, or from many countries. Funds may focus on some size of company, that is, small-cap, large-cap, et cetera. Funds which involve some component of stock picking are said to be actively managed, whereas index funds try as well as possible to mirror specific stock market indices.

Well, simply stated, equities represent ownership in a corporation. A corporation sells stock to raise capital and each share of stock represents a piece of the company. An equity fund may hold numerous carefully selected stocks. The fund manager selects these stocks because he or she believes they can work towards achieving a fund's stated objective, which could be long-term growth, total return, capital appreciation or a combination of the three. Stocks also can be combined with bonds to create funds that offer both growth and income.

What Equities Risks Are
Historically, equities have been long-term performers, but they also have a history of greater price volatility than bonds and cash equivalents. Equity funds may offer some degree of diversification because they hold many different stocks. But, they can be volatile and their share prices often can move substantially higher or lower on a daily basis.

Equity investments may fluctuate for a variety of reasons. Three common ones include news about a company, economic developments and changes in interest rates.

How Owning Them May Fit Into Your Financial Plan
Because of the potential long-term rewards equity funds may offer, they are often used to work toward long-term goals such as retirement, a child's college education or buying a home. Because of the risks involved, financial advisors may suggest combining equity funds along with lower risk investments as part of an investor's long-term financial plan.

Source:
a. https://www.oppenheimerfunds.com
b. http://www.wikipedia.org/