Mar 28, 2017 3 min read

Why are Equity Funds Preferred Over Others?

If your fund advisor is advising an equity fund investment to you. Here are the reasons for the same.
Whenever one thinks of making an investment, the advisors recommend the equity mutual funds. The reason being is that they provide the best opportunity of generating higher capital growth. But are all equity funds provide similar benefits? Should you invest in the equity mutual fund plans? Don’t get confused, find the right solution here.

Defining Equity Fund

An equity fund is a mutual fund programme that has investments principally in stocks. It is managed by the fund managers the both ways, i.e, actively or passively. Equity funds are also known as stock funds as they have stock investments made for the purpose of gaining capital appreciation. These funds are bifurcated on the basis of market capitalisation into large-cap, mid-cap, and small-cap funds. Moreover, another classification of equity funds is made as per their investing style. Along with several benefits of capital growth and high earnings, equity investments also provide the 80C exemption.

Why is Equity Fund an Ideal Investment Vehicle?

There are many ways in which equity mutual funds are considered as a perfect investment solution for the investors who are either not well-versed in financial investing or do not possess a huge capital to invest. Equity funds are a practical investment for most of the people.

The factors which made equity funds a suitable plan for the individual investors include the reduction of risk due to well-diversified fund’s portfolio, and requirement of relatively small amount of capital to acquire shares of an equity fund. In order to diversify the funds for reducing risk factors, investors are required to invest a larger sum of capital. By pooling small investors' money altogether, the best diversified equity mutual funds effectively diversify the capital without burdening each investor with large capital requirements.

Reasons to Prefer Equity Funds for Investments

Every investment is made for the purpose of accomplishing a long-term desire. For short-term financial needs there are instruments like debt schemes wherein one can park the money to meet the instant cash needs easily. But when it comes to the actual investment planning, it is basically made for a longer tenure to meet the future financial expectations. Here are some of the primary reasons why every advisor suggests to opt for the equity mutual funds while making a financial plan for a far-off goal.

1. Stocks and stock mutual funds have the most potential for growth.
The stock mutual funds have been the consistent performer and gainers in the mutual fund industry for a long time. Being the most effective source of generating income, the schemes falling in this category have offered returns even up to 20% every year. This is just for a few schemes, there are many more plans whose generated profits have helped many in growing richer by creating wealth.

2. You can easily endure the ups and downs of market.
You probably understand that maintaining stocks in the portfolio makes sense, but you must be afraid of the market drops. It is indeed a fact which can never be overcome. Bearing the market volatility for a certain period is painful, but if it offers the same level of growth over a long period then making wealth will not be a challenge. The equity funds are managed in an efficient manner and designed while keeping diversification a notable factor. Thus, the chances of losing capital due to the market moves are less and one can feel safe and secure.

3. You don’t need to invest all your money at a single stock.
By investing your money in the equity mutual fund plans online, you don’t need to stay boring. Rather, your money gets the chance to explore different sectors, companies and even instruments. There are various plans falling in the category which have a certain investment in the debt instruments as well. This way, the money earns regular interest income along with the growth in capital.

Accordingly, equity forms a dominating position in the market due to which it is mainly preferred for every long-term investment goal. You too can make your financial dreams come true with investment in the best equity fund schemes in India.

MySIPonline and its team provide the ease of identifying the best equity schemes for your portfolio. If you wish to make a worthwhile investment, then you must avail our free investing services right away.