What are the Different Types of Equity Funds?

Updated: December 30, 2023

The stock market is a great place to invest in the long-term. However, if you don’t want to invest directly in stocks, a good alternative is to invest in equity funds.

Equity funds are pooled funds that invest primarily in the stock market. They can either be a Unit Investment Trust Fund (UITF), a mutual fund, or an Exchange Traded Fund (ETF).

The main advantage of investing in equity funds versus directly in the stock market, is you don’t have to trouble yourself with selecting which companies to buy. The fund manager does all the buying and selling for you through the fund.

However, not all equity funds are the same. They may all invest in the stock market, but each equity fund will have its own objective and investment strategy.

So be sure to invest in an equity fund that’s aligned with your own investment objective. To help you decide, here are the different types of equity funds in the Philippines.

Different Types of Equity Funds

1. Index Funds
This equity fund primarily invests in companies that belong to a particular index. And they try to mimic the performance of that index. So as the index goes up, so does the fund’s price and vice versa.

They usually have the word “index” on their name, such as the BPI Philippine Equity Index Fund, which follows the Philippine Stock Exchange Composite Index (PSEI). Furthermore, all Exchange Traded Funds (ETF) are index funds.

2. Equity Funds
The most common type of equity fund in the Philippines. The fund managers here trade and invest shares of various companies. The objective is to have significant price growth over the long-term.

They often have the words “growth”, “opportunity”, “prosperity”, and similar words to their name. Examples are the Philam Strategic Growth Fund and the ATRAM Alpha Opportunity Fund.

3. Dividend Funds
Aside from price appreciation, stocks also offer returns in the form of dividends. Some equity funds focus on buying companies that regularly give good dividends, and that’s why they’re called dividend funds.

The word “dividend” is normally in their name. A couple of examples are the BDO Sustainable Dividend Fund and the Philequity Dividend Yield Fund.

4. Cap Funds
Cap is short for capitalization, which mainly refers to the size of the company. A large-cap equity fund invests in big, well-established companies in the stock exchange. An example is the UnionBank Large Capitalization Philippine Equity Fund.

Meanwhile, mid-cap equity funds and small-cap equity funds invest primarily in companies with medium market capitalization and small market capitalization, respectively.

5. Sector Funds
Sector funds invest in companies that belong to a particular sector. A mutual fund, for example, that mainly buys shares of publicly-listed real estate companies can be referred to as a real estate equity fund.

The BPI Philippine Consumer Equity Index Fund is a good example of an equity fund that invests in companies in the consumer sector, such as Purgold (PGOLD), Jollibee (JFC), San Miguel Corporation (SMC), and others.

6. Global Funds
Equity funds in the Philippines that invest in the stock exchange of other countries are called global funds. They’re usually US dollar-denominated, but not always.

Examples are the Sun Life Prosperity World Voyager Fund, which invests in corporations domiciled in developed and emerging markets. And the ATRAM European Equity Opportunity Feeder Fund, which invests primarily in European equities”‹”‹.

How to Invest in Equity Funds

1. Through commercial banks
They primarily offer Unit Investment Trust Funds (UITF). Just go to your favorite bank and inquire about their available equity funds, and make sure to ask for the fund prospectus.

2. Through asset management companies
These are also and more commonly referred to as mutual fund companies. You can go through the list of different mutual funds and who offers them at Philippine Investment Funds Association website.

3. Through life insurance companies
Almost all life insurance companies offer equity funds. It’s where they invest the money of those who bought an investment-linked insurance policy. Ask an insurance agent how you can invest in them.

4. Through stock brokers
This is where you can solely invest in an Exchange Traded Fund (ETF). Just open an account, and buy the shares of your desired ETF as if you’re buying shares of a publicly-listed company.

At present, there’s only one ETF available in the Philippines, the FMETF, or First Metro Exchange Traded Fund.

Moreover, there are equity funds and ETF’s that are based in other countries. If you’d like to invest in global funds, you can sign up with a multi-asset broker such as XM.

5. Through licensed distributors
They’re often called fund supermarkets. Through them, you can access many types of equity funds from different companies. At present, there’s the COL Fund Source, Rampver Financials, and Seedbox PH.

Equity Funds are Long-Term Investments

Equity funds, because they invest in the stock market, are high-risk investments. They are best for your long-term financial goals such as your retirement fund.

Lastly, if you’d like to continue learning, then perhaps you can read next about the different types of mutual funds in the Philippines.

What to do next: Click here to start your financial journey with IMG Wealth Academy

One comment

  1. Excellent and informative post Mr Fitz, I salute you for the work you do in educating folks. Personally, I like ETFs. When you trade an index ETF or a sector ETF, you have relieved yourself of the chore of analyzing/choosing individual stocks. You have eliminated individual stock risk. Bad news on one stock in the ETF will not sink your account because you are diversified. In the US, we literally have thousands of ETFs but many are small, low volume, not worth trading. With the larger index ETFs your main “job” is to determine the trend and jump on. I use these ETFs as an underlying to write options against. We are also fortunate to have a number of inverse ETFs that go up when the market trend is down. You can both hedge your account and still make money when the bear comes calling. Options are also available on many inverse funds. Another great oppertunity for traders are commodity ETFs where you can trade grains, coffee, natural gas, crude oil and other products. There are also currency ETFs available . One of my regular trades is following the cycles in crude oil. We use crude oil ETFs and options to produce a regular income stream. This post is already lengthy enough but if anyone is interested in how to cash flow these ETFs, I suggest you post a question.

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