Equity Diversified vs. Multicap Funds: Which is Right for You?
Equity diversified mutual funds and multicap funds are both types of mutual funds that invest in equities. However, there are some key differences between the two. Let us compare Equity Diversified vs. Multicap Funds
Equity diversified mutual funds
Equity diversified mutual funds are a type of mutual fund that invests in a variety of equity stocks. The fund manager invests in stocks from different sectors and market capitalizations in order to diversify the portfolio and reduce risk.
Equity diversified mutual funds are a good option for investors who are looking for a diversified exposure to the equity market. These funds are also a good option for investors who are new to equity investing, as they offer a lower risk than investing in individual stocks.
Multicap funds
Multicap funds are a type of mutual fund that invests in a variety of equity stocks across all market capitalizations. The fund manager has the flexibility to invest in large-cap, mid-cap, and small-cap stocks.
Multicap funds are a good option for investors who are looking for a diversified exposure to the equity market and who are comfortable with higher risk. These funds are also a good option for investors who have a long-term investment horizon.
Key differences between equity diversified mutual funds and multicap funds
The key difference between equity diversified mutual funds and multicap funds is the level of flexibility that the fund manager has in choosing stocks. Equity diversified mutual funds have a mandate to invest in a variety of equity stocks, but they are not restricted to any particular market capitalization. Multicap funds, on the other hand, have the flexibility to invest in any market capitalization.
Another key difference is the risk profile of the two types of funds. Equity diversified mutual funds are generally less risky than multicap funds, as they invest in a wider range of stocks. Multicap funds, on the other hand, are more risky, as they have a higher exposure to small-cap stocks.
Which type of fund is right for you?
The best type of fund for you will depend on your individual circumstances, including your risk tolerance and investment goals. If you are new to equity investing or are comfortable with lower risk, then an equity diversified mutual fund may be a good option for you. If you are looking for a more diversified exposure to the equity market and are comfortable with higher risk, then a multicap fund may be a better option for you.
It is important to carefully consider your investment goals and risk tolerance before choosing any type of mutual fund. You should also consult with a financial advisor to get personalized advice.