Equity Fund — Mutual Fund Term Explained

A mutual fund investing primarily (≥65%) in stocks. Highest long-term return potential but highest short-term volatility.

Equity funds invest at least 65% of their assets in equity shares. Classified by market cap focus (large, mid, small), investment style (value, growth), or sector/theme.

Equity fund gains held for more than 1 year are taxed as LTCG at 12.5% above ₹1.25 lakh per year.

Related terms

• Large Cap Fund — A fund investing at least 80% in the top 100 companies by market cap. Lower volatility with stable blue-chip exposure.
• Mid Cap Fund — A fund investing at least 65% in companies ranked 101-250 by market cap. Higher return potential than large cap but significantly more volatile.
• Small Cap Fund — A fund investing at least 65% in companies ranked 251+ by market cap. Highest return potential but most extreme drawdowns. Requires 10+ year horizon.
• Flexi Cap Fund — An equity fund with no restriction on market cap allocation. The manager can invest freely across large, mid and small cap stocks.
• ELSS (Equity Linked Savings Scheme) — An equity fund eligible for ₹1.5 lakh deduction under Section 80C. Mandatory 3-year lock-in per installment. Best tax-saving option with equity returns.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.