Equity funds are pooled investments that invest the majority of assets in stocks. These funds can be actively or passively managed.
Also called: Stock fund
What is an equity fund?
- Equity funds are also referred to as stock funds.
- Underlying holdings are composed of only stocks.
- Each equity fund can focus on a specific category of stocks, such as market cap, investment style, or geography.
Equity funds, also referred to as stock funds, invest most of their assets in stocks. Equity funds can be actively or passively managed.
Equity funds can be very broadly diversified, or they can offer exposure to narrow sections of the market. For example, they may focus on stocks with similar market caps (small-, mid-, and large-caps) or similar style (value, core, and blend). They may focus on sectors or narrower areas of the broader market, such as technology, healthcare, and energy; or they may invest in stocks of similar geography (all U.S., all Europe, and all Japan).
Morningstar assigns funds into different categories, or peer groups, based on their portfolio statistics and compositions over the past three years. These groupings help investors and investment professionals make meaningful comparisons between funds. The categories also make it easier to build well-diversified portfolios, assess potential risk, and identify top-performing funds.