May 03, 2017 4 min read

Why Should One Invest in the Equity Mutual Funds?

Know why buying equity funds is favorable for every type of investor.
The current market scenario is showing high market fluctuations in the stock indices which is affecting the performances of the mutual funds in one or the other way. Where Sensex and Nifty reached their all-time high at the beginning of the financial year 2017-18, they opened great opportunities for the investors to invest in the equity mutual funds in order to enhance their financial status.

So if you too have been looking for an opportunity to make a worthy investment in the equity funds, then this is the right moment.

Reasons to Invest in Equity Funds

1. Equity Funds Offer Widespread Diversification of the Invested Capital

The investments made in the equity mutual fund provide the major benefit of wide diversification. It has been bifurcated into several categories as per the market capitalisation and sectors. The schemes in the equity fund do not park all the invested money in a single avenue, rather opt for different alternatives and invest in the appropriate proportion.

2. Initiating Investment with a Very Small Amount is Possible

The equity funds keep 1% to 5% of the funds in the individual stocks, and in the case of an average small investor, he/she would require a huge sum of money. But by investing the equity mutual funds, one can gain the benefits of stocks. Furthermore, the SIP plans provide the convenience of investing a small amount in the equity schemes at a regular interval in a convenient manner.

3. Professional Management of the Funds at a Low Fee

If one goes for hiring financial advisors to seek help in buying the best stocks or investments, one will have to pay a huge some of money to them. The diversified equity mutual funds are managed by professional & expert fund managers who utilise their tactics to design the best portfolio for the investors. This way, one attains the benefit of the expertise of the fund managers and invest in the best managed funds without bearing any extra cost.

4. Theme or Sector Based Investing is Made Possible

Many a time investors wish to invest their money in specific industries in order to gain substantial growth with the growing sectors. For that, equity mutual fund provides sector funds, which primarily invest in diversified stocks of various companies falling in a particular industry. So one can gain higher returns on equity funds by investing in some particular sector as well.

5. Tax Benefits are Superb

In India, the earnings on equity investments are completely tax-free. Investors need not pay any tax on the income earned on the equity mutual funds in the form of a dividend or capital gains. Accordingly, one can attain higher earnings in these funds without bearing the tax liability.

6. Capital Appreciation

The investments in equity schemes are made in the stocks and shares of the companies which tend to generate huge capital for the investors in a considerable period. Hence, one gains the opportunity to create riches with easy investing in the equity mutual funds.

These are some primary benefits that equity funds provide to the investors. By parking funds, in them, one can attain one’s financial goals with ease.

Suitability of the Equity Mutual Funds

You must want to know whether equity funds are suitable for your investing needs or not. Just have a look at the following factors to understand equity schemes have investing options for almost every type of investor.

a. As Per Risk Appetite

The equities are largely held for the purpose of gaining capital growth. The investors with different risk profiles can opt for the suitable fund for their portfolio. For aggressive and moderate risk takers, equities have schemes that invest in small- and mid-cap companies in different proportion as per the investing goals; while for those with conservative risk-bearing capacity, equity funds have large-cap stock investments. This way, investors can find the best fund for their portfolio to make better earnings without compromising on the risk factors.

b. As Per Investment Tenure

The investment tenure plays a major role in finding suitability of the funds for the investors. In the case of equity mutual funds, the long-term investments are more favourable. As they have money parked in the stocks and shares having high volatility factors, they tend to provide exceptional risk-adjusted profits to the investors in the long-term horizon. However, some schemes are falling in the same category which generate considerable profits in the medium-term as well.

So accordingly, you can opt for any of the plans as per your requirements out of the countless equity schemes available in the mutual fund industry. At MySIPonline, you can avail the free advisory facility through which our financial experts provide unbiased advice for your financial goals.