Equity fund

Investment fund predominantly invested in equities.

Equity funds invest in shares of listed companies. These funds have to gather a pool of different stocks in their portfolio and are usually not allowed to invest more than 5 percent of its assets in a single stock. Therefore, equity funds usually hold at least 20 different stocks in order to remain faithful to the principle of diversification. Exceptions only apply if the terms of the fund in question will allow these. In this case, up to 10 percent of the portfolio value may be invested in a particular stock. Equity funds facilitate investors in diversifying their investments in various companies using only low amounts.

There are different investment approaches: some equity funds invest in large international corporations, other specialize in specific countries or industries. Still others pursue targeted strategies, such as dividend maximization or sustainability.

Equity funds depend on the global equity markets and cannot disconnect from their development: decline on the stock market prices mean that the prices of equity funds also fall. The risk of loss and of longer periods of weakness grows the more specialized an equity fund is, but increases, at the same time, its return potential. Conversely, the more a fund is diversified, the more robust is its performance in case of market fluctuations.

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