What Is A General Equity Fund?

What is a general equity fund? While similar to growth and income funds, equity funds are more likely to hold bonds and focus on stocks that pay higher-than-average dividends. A general or income equity...

A general or income equity fund, according to Michelle Smith and the Mutual Fund Education Alliance is "A mutual fund that invests in a portfolio of bonds and dividend-paying stocks. While similar to growth and income funds, they are more likely to hold bonds and focus on stocks that pay higher-than-average dividends." Another term that you may run across for equity fund is stock fund.


They are usually divided up in two ways. One way is by strategy type. There are three divisions of this type. The first is growth funds. The MFEA and Michelle Smith define a growth fund as "A mutual fund whose primary investment objective is long-term growth of capital. It invests principally in common stocks with significant growth potential." They are considered high-risk and do not provide dividend income in most cases. The next strategy type is value funds. The aim is to find funds that are part of large and medium sized companies. These companies lost market favor or just have not been noticed. They do pay dividends in most cases. The final strategy type is blend funds. By the name, you can guess it is a fund that is a mix of growth and value stocks.




The other way that equity or stock funds are categorized is by their size. Michelle Smith and the MFEA have this definition of a large-cap fund, "A mutual fund that invests in the stocks of companies whose total outstanding shares are generally valued at $10 billion or more. Large-capitalization stocks are generally stable, well-established companies and likely to have minimal fluctuation in their value." The other two sizes are mid-cap funds and small-cap funds. A mid-cap fund company has a market value between $1 billion to $9 billion. Small-cap funds are those companies valued at less than $1 billion. They tend to use profits to grow instead of paying dividends to their investors.

These types of funds are useful for the young investor with many years to grow retirement income or for those persons who can tolerate a high level of risk. Aggressive growth funds tend to have wide swings between up and down. There is a real risk of losing your principal, but the rewards can be high as well, if the emerging company is a huge market hit. International or global funds are another type of high-risk equity fund. They invest in companies outside the United States and should have careful scrutiny before investing.

Growth funds and growth and income funds seek a middle ground. They search for some stability with your principal, but also look for growth opportunities. Many of these have a great record of accomplishment over the long-term, but may seem less in the short-term. Persons who need some income tend to stay in this area as they are not yet ready for retirement, but are not young.

Equity funds tend to be comprised of what is called common stock. These securities tend to provide voting rights and return a portion of the success of the company through dividends or appreciation. They have a vote on who serves on the board of directors and receive other benefits as well.

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