What Is A Diversified Equity Fund?

A diversified equity mutual fund refers to any equity fund that invests in companies across multiple sectors and industries. While an ordinary equity fund selects stocks, from a pool of listed stocks, that comply with the investment strategy; a diversified equity mutual fund invests in stocks across companies, industries and market capitalisation.

The primary objective of diversified equity funds is capital appreciation over a long term. These mutual funds seek to participate in the overall economic growth, considering they are not limited to a specific industry or market capitalisation.Generally, a diversified equity fund can invest in companies across the following sectors:

• Pharmaceuticals
• Automobiles
• Engineering
• Power/Utilities
• Technology
• Oil and gas
• Banking and finance
• FMCG

Investing in diversified equity funds is a prudent long-term investment strategy that has the potential to generate sizeable returns even when the market is not performing at optimum capacity.
Some of the benefits have been stated below:

• Suitable investment avenue for different sectors and market caps Investing in companies across industries and market capitalisation helps you avert unsystematic risks that may result from sector or market cap-specific stocks or funds.
• Diverse share prices A diversified equity mutual fund invests in stocks starting from Rs.500 to ones that may run into lakhs. This is beneficial particularly for first-time investors seeking exposure to the equity market. Importantly, investors with a smaller risk appetite can benefit as well.
• Professionally managed investment In case you are not a seasoned investor, an expert fund manager can help you tide over challenging economic scenarios by enabling you make informed decisions, thereby keeping market volatility at bay.
• Easy investment vehicle You can leverage a Systematic Investment Plan (SIP) that allows you to invest small amounts periodically (can be weekly, monthly or quarterly) instead of a lump sum. This serves to encourage financial discipline.Similarly, a Systematic Transfer Plan (STP) enables you to transfer a predetermined amount from a source scheme to a target scheme (debt fund to equity fund or vice versa). It negates the need to time the market. An STP serves to stagger investments over a period of time, thereby checking risks and balancing returns.

Also, you can make use of a Systematic Withdrawal Plan (SWP) that allows you to periodically withdraw a pre-defined sum. In conclusion To make an informed investment decision, compare returns across funds within the same category, followed by comparing returns vis-à-vis the benchmark.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.