The equity mutual fund is an investment instrument that invests your money in company stocks and aims to generate high returns. You can use these investments to fulfill your financial goals over long as well as short investment tenure. You will be able to generate better returns than debt funds or fixed deposit investments. However, there are no guaranteed returns as it is a market-linked scheme.
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If you are looking for some motivation to invest in equity funds then you must have a look into the following points that will allow you to understand why this is one of the best investment options:
One of the key benefits investors get on equity mutual fund investment is much higher returns on investments. Equity mutual funds are financial instruments that give inflation-beating returns due to the risk factor associated with it. You can buy units of the shares when the price is low. When there is a price hike, it would reflect in appreciation of the NAV of the purchased stocks. An investor can generate exceptional returns over a short investment period as well.
See Also: Why Index Funds are Good Investments?
After investing the money you do not need to review your fund daily. The best advantage of the equity mutual fund investment is that the scheme is managed by proficient fund managers. These are the best schemes for investors who have the desired risk appetite but are unable to invest due to a lack of financial market knowledge. Here the fund managers help the investors and thus they manage the money on behalf of the investor.
Equity mutual fund investment helps investors get the benefit of portfolio diversification. These investments get diversified into various sectors thus reducing the chances of incurring a loss. So if any company underperforms at the stock exchange, the other performing companies listed in the portfolio can make up for the losses. Due to this the risk factor is minimized in the overall portfolio. However, the risk factor cannot be neglected and one cannot escape risks associated with equity funds.
Primarily there are three ways through which you can make mutual fund investments namely direct investment, online investment and investment through agents. Most investors take the online route as the process is convenient and user-friendly.
You have to select an online brokerage firm and you can start investing only by entering a few details. It is necessary to have a PAN card and be a KYC compliant which transacting in mutual funds.
Any person can invest in mutual funds through the SIP mode. You can start investing with a minimum investment of Rs. 500 each month. You can invest a specific amount at regular intervals through the ECS process where the money gets automatically deducted from your savings account at a specific date.
However, if you are a beginner and choosing the online mode of investment then a fund manager can be of great aid and can help you identify the right equities and help you achieve your financial goals.
Investors will get significant tax benefits by investing in equity mutual fund schemes. If you invest a lump sum amount for a lock-in period of 3 years then you can avail tax benefits under section 80C of the Income Tax Act, 1961. Investors can avail maximum tax benefits of up to Rs. 1.5 lakh per year. The schemes namely PPF, FDs, NSC that can avail section 80C tax benefits have a lock-in of 5 years. Through mutual fund investment, you can not only generate higher returns but also get maximum tax benefits for a lower lock-in.
Other tax benefits include tax-free returns. When the investment in equity mutual fund crosses the 12 months then the returns become tax-exempt. The returns then get classified as long-term capital gains where you have to pay tax at 10% on an amount over 1 lakh per year.
See Also: Mutual Funds with High Returns
These funds are highly liquid and thus the money can be redeemed at any point in time. You can get back the corpus into your bank account easily by selling your investments. You can simply stop making the SIP payments and redeem any number of units you want. The process of redemption hardly takes a week and you can avail the money easily. However, if your SIP is matured you can receive the money in your bank account in 3 days.
A Systematic withdrawal Plan in mutual funds is a facility which can be used by investors to withdraw a specific amount of money from a mutual fund at regular intervals. The investors have the flexibility to choose the intervals as per their requirements. An investor can benefit as the phased withdrawal gives him monthly cash-flows and gives his money a longer period to grow.
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