5 Min Read | April 17, 2021
Perhaps, equity investment doesn’t interest everybody. For some, it’s a zero-sum game and hence, they see it as a complete waste of money. While a few view it as a gamble. However, there are also some who simply love equity investing, even if they don’t understand it completely.
Mainly, equity investors buy a company’s shares with the expectation that they will surge in value in the form of capital gains and they may generate capital dividends.
In case the equity investment increases in value, the investor would get the monetary difference if they sold their shares, or if the assets of the company are liquidated and all its obligations are satisfied. Equities add diversification which might strengthen a portfolio’s assets allocation.
An equity investment is referred to as money invested in a company by purchasing that company’s shares in the stock market. Typically, these shares are traded on a stock exchange.
Among all mutual funds, equity mutual fund is more probable and has the most potential to bring in great returns. Obviously, there’s a certain level of risk associated with equity mutual funds since this is the stock market.
Consequently, investors having a high-risk appetite are most likely to invest in equity mutual funds.
In the very beginning, we discussed that equity investment has the potential to strengthen your portfolio by adding diversification. But that’s not just all equity mutual funds have to offer to their investors.
Here are some of the greatest perks of investing in the equity mutual fund:
Some equity mutual funds like ELSS (Equity Linked Savings Schemes) offer tax benefits under Section 80C of the Income Tax Act, up to a maximum of Rs 1.5 lakhs annually.
Adding cheery to the cake, this scheme has a lock-in period of 3 years which is the lowest if you compare it with any other investment options such as Public Provident Fund, Fixed Deposits, NPS, etc.
Besides, the long term capital gains tax for ELSS funds up to Rs 1 lakh is tax-free.
Another main benefit of equity investment is to get better capital appreciation. It’s an instrument that can offer you high returns and which has the potential to beat inflation year after year.
Moreover, you can also save inflation-beating returns. If the stock prices increase, it would reflect in appreciation in the invested money. Upon investing in an equity mutual fund, you can collect a good amount of wealth over a period.
Stocks like MRF Ltd that is priced above Rs 80,000 a stock are pretty expensive and hence, not everyone can afford to invest in them. However, you can invest in MRF Ltd through an equity mutual fund.
Equity mutual funds allow you to invest for as low as Rs 100. In turn, this fund can invest in MRF Ltd. Therefore, equity funds are quite pocket friendly and also offers flexible plans such as Systematic Investment Plan, etc.
Mutual funds are highly and professionally managed funds. The fund managers work in the best interest of investors while abiding by the fund investment philosophy and objectives.
Fund managers devote their whole time operating the fund and hence, take the right decisions depending on the market movement as they keep proper track of the portfolio and market continuously.
Since mutual funds also have high liquidity, you can redeem your investments anytime you want (except ELSS funds with a lock-in period of three years). The complete process of redemption and funds crediting to your bank account takes 1-3 days.
Equity mutual funds offer a diversified portfolio. This means that the money that you invested isn’t actually invested in one stock but a bucket of stocks. In case some of the stocks are underperforming, the other stocks in the fund would compensate for the losses.
Therefore, equity mutual funds let you minimize your overall risk.
Therefore, we observe enough grounds that prove why you should invest in equity mutual funds.
So, should you invest in Equity Mutual Funds?
Surely, you should if you want to have better returns than a fixed deposit and wish to achieve your financial goals faster.
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Until then, happy investing!
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