Equity mutual funds are also known as stock mutual
funds. Equity mutual funds invest pooled amounts of money in the stocks
of public companies.
Stocks represent part ownership, or equity, in companies, and the aim
of stock ownership is to see the value of the companies increase over
time. Stocks are often categorized by their market capitalization (or
caps), and can be classified in three basic sizes: small, medium, and
large. Many mutual funds invest primarily in companies of one of these
sizes and are thus classified as large-cap, mid-cap or small-cap funds.
Equity fund managers employ different styles of stock picking when they
make investment decisions for their portfolios. Some fund managers use a
value approach to stocks, searching for stocks that are undervalued when
compared to other, similar companies. Another approach to picking is to
look primarily at growth, trying to find stocks that are growing faster
than their competitors, or the market as a whole. Some managers buy both
kinds of stocks, building a portfolio of both growth and value stocks.
