In this chapter we look at the universe of equity funds. We will start first with the cheapest and very widely used equity-indexed funds. We also look how they differ from exchange-traded funds (ETFs), and analyse what may be their long-term benefits for you.
The next three sections will focus on the three main types of mutual funds: value, growth and blend funds. Value funds invest in equities that are considered to be undervalued in price. They focus on safety rather than growth, usually investing in mature companies that would use their earnings to pay dividends.
Equity growth funds invest in companies that have above-average growth in earnings that would usually reinvest their earnings into expanding the company, acquiring new companies and/or research and development.
Blend funds are a mixture, or blend, of value equities and growth equities. The goal of these funds is capital appreciation and they usually pay dividends. We are also going to look into how those funds compare with balanced funds, as sometimes the names are mixed up by some investors.
We then look at equity sector funds. These are funds that invest only in companies that operate in a particular