An equity fund seeks a higher rate of return through capital appreciation of stocks, traded mainly on approved stock exchanges. The features of equity funds are as follows:
The risks of an equity fund are generally higher than those of other types of funds. Returns may be affected by factors such as the volatility of stock markets and fluctuations in exchange rates. If the fund invests in stocks denominated in a foreign currency, the depreciation of that foreign currency may also lead to a drop in the price of the fund
- Higher potential returns and risks: With more aggressive investment targets and better potential returns, the risks of an equity fund are generally higher than those of other types of funds. Major risks include the volatility of stock markets and fluctuations in exchange rates.
- Diverse choices: Equity funds are frequently described in terms of geographical allocation: those investing in a single market (e.g. Hong Kong Equity Fund), regional markets (e.g. European Fund) or global markets, offering members greater diversity of choices.
- Making use of dollar-cost averaging: The longer the investment period, the more effective “dollar-cost averaging” will average out the market fluctuations. This is particularly useful in counteracting the effects of short-term market volatility.