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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