What is a equity - sector fund and its types

A sector or an equity fund can be commonly defined as a fund that invests in equities more commonly known as stocks. They are in contrast with bond funds and monetary funds. They are mainly in the form of shares with some amount of cash existing with them. The cash amount is generally small. In contrast to bonds, notes or other securities, they maybe also classified as a mutual fund or an exchange-traded fund.

The objective of an equity fund is long-term growth through various capital gains, though previously dividends were also viewed as an all important source of total return. Some specific equity funds focus on a certain sector in the market and mark it towards a certain level of risk.

A sector fund is identified by several properties. Sector funds have a specific style, for e.g., value or growth. Funds are invested solely by the securities from one country or from various countries. Funds may or may not focus on some size of a company that might be small-cap, large-cap or mid-cap. Funds which allow involvement of some components of share picking are said to be managed actively. While index funds try as much as possible to be mirror specific stock market indices.

There are different types of Sector funds.

1)            Index Fund: Index funds allow investment in securities to mirror a market index. An index fund purchases and sell securities in a manner that reflects the composition of the selected index.

2)            Growth Fund: A growth fund invests in the stock of companies that are growing at a furious pace. These growing companies tend to re-invest most of their profits for research and development rather than paying dividends to its investors.

3)            Value Fund: A fund that allows investments of “value” in stocks. Companies that are rated as value stocks usually are old and established business setups that pay dividends.

4)            Sector Fund: A fund that invests only in a particular area of industry is known as sector fund. Most sector funds have a minimum leverage of 25% of their assets invested in this specialty.

5)            Income Fund: An equity income fund lays more emphasis on the current income over growth. The objective of the funds might be accomplished when investment of stock companies with long records of dividend payments such as utility stocks, blue chip stocks and preferred stocks are given more importance.

The other various types of funds are:

1)            Option income Funds

2)            Balance Funds

3)            Asset allocation Fund

4)            Fund of Funds

5)            Hedge Funds

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