Equity funds are those that invest more than 75% of their capital in equity financial assets, that is, stocks, publicly-traded companies, stock indices, etc. and that, as their name suggests, obtain variable returns.
In turn, they usually have different categories: Depending on the different countries in which they make the investment (Spain, eurozone, US, emerging countries, etc.) or, to take another example, depending on the business sectors (technological, financial, etc.).
Equity funds are a type of fund only recommended for long-term investments (over 5 years), which allow specific market volatility to be offset, with the best return expectations that invest in this type of market.
The recovery of invested capital and return on investment are not guaranteed in equity funds. For this reason, this type of funds are suitable for a risky investment profile, although one of the most notable advantages of this type of investment fund is that they have better returns compared with other types of products and greater liquidity.
Unlike other investment funds, equity funds do not involve mandatory permanence. In addition, recovering the investment in shares and units will be faster, since in this type of instruments, liquidity is greater than in fixed income.
Like other funds, equity investment funds are regulated by the Spanish National Securities Market Commission (CNMV).
Investing in equities investors can receive returns in two ways:
- Invested capital growth: when the share price is higher than what the bank paid at the time at which it was purchased.
- Dividend distribution: they represent a part of the profit generated by the company and are distributed to shareholders at fixed times throughout the year.