What's the difference between an index fund and and equity fund?

I have a little money that I'd like to invest. The stock market is an option I am looking into. I'm a neophyte at this thing and trying to learn the ropes.
I read that index fund is a more secure investment and am seriously considering it. Then during the course of my reading I came across an equity fund.
I would just like to know the difference between these two types of fund.
Where should i put my money on, an index or equity fund?
any information that can shed light on this matter would be of great help. Thanks a lot.

An index fund seeks to mirror a particular index....there are many to chose from but a very common one is the S&P 500....the fund owns shares of the companies that belong to the S&P500 in the same weighted percentage they are in the index....as I said there are many different indexes to chose from and a good strategy is to invest in a well diversified portfolio that would include multiple indexes such as large and small US companies...some bonds....international companies etc...

An equity fund is a mutual fund that invests in equities (stocks). These types of funds have a certain investing philosophy they have to follow that can be found in the funds prospectus. They are also typically actively managed which means that a fund manager or managers actively buy and sell inside the fund to try to beat the performance of the indexes. Again if you chose this route you want a well diversified portfolio across many differnt asset classes.

Which you chose is a matter of opinion some like indexes because they are simple and cheaper and some argue a good manager can beat the market....

As a side note...if you don't have enough starting out to create your own diversified portfolio I would suggest a fund called the Ivy Asset Strategy fund...I own this fund and love it...the fund managers can invest in any asset class they think will yield good returns...it is a great place to start if you don't have enough money to buy multiple funds (either indexes or actively managed).

Index fund spreads your money across an index of 100, 500, 2000, or 3000 or so different companies.

Equity fund I believe invest in a smaller number and trades more frequently.

Stick your money in an S&P 500 Index and you'll do well. Another good alternative is Exchange Traded Funds. (ETF).

An index fund means the fund holds the same percentage of stock of the given index. For example, S&P index fund holds all 500 S&P stocks with the same percentage weighting as the actual S&P.

An equity fund simple means the fund only invests in stocks.

They are different ways of classifying funds. A given fund might be an equity fund, an index fund, both, or neither.

'Equity' refers to what the fund contains. Equity means stocks. It may hold US Stocks, european stocks, stocks from all over the globe, etc. Alternatives to an 'Equity' fund would be bond funds, REIT funds, etc. Equities tend to have higher returns over time then bonds or cash, but are also more volatile. If you are investing with a long time horizon, you should probably have most of your money in equity funds.

'Index' fund refers to how the fund management company selects the securities (whether that is stocks, or bonds, etc) within the fund. In an 'active' fund, the fund manager tries to select securities that they believe will do better then average. In a 'passive' or 'index' fund, the fund management company simply buys every security in that 'realm'. So if we are talking about, for example, the 'realm' of the 'S&P 500' - which means the largest 500 US companies, an 'active' fund will pick somewhere between 20 and 80 of those companies, while an index fund based on that benchmark would simply buy all 500.

Active funds have, on average, done better then index funds. Until you include fees. You see, it doesn't take a lot of work to simply buy all 500 stocks. You need one guy and a computer to do programmed trading. For active management, you have to pay analysts and portfolio managers to make these decisions, and those guys make tons of money. The average active fund does do better then the average passive fund ... but by less then the additional fees they charge. After fees, you're often better off passive.

A reasonable question is, are there funds that can do better? The answer to that is _perhaps_. But I would always suggest that people begin with passive funds, and then look with a cynical and critical eye at active funds. You should need to be _convinced_ that a given fund is likely to earn additional return in excess of its fees before moving from a passive fund.

An active equity fund and an indexed equity fund have similar risk levels, on average.

The best way to cope with risk is to have a diversified portfolio, some US stock, some world stock, some emerging stock, some bonds. If you are young, not too many bonds. You can buy each of those with an index fund, and you'll do better then most people out there. Everyone _needs_ a good mix of asset classes. Nobody _needs_ active funds.