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7 Reasons Why You Should Invest in Equity Mutual Funds

IndianMoney.com Research Team | Updated On Monday, July 01,2019, 03:25 PM

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7 Reasons Why You Should Invest in Equity Mutual Funds

 

 

Equity mutual funds invest most of your money in stocks. Funds are managed by the fund manager. The primary objective of this investment is to generate inflation-beating returns by investing regularly over the long-term. These investments are suitable for investors who have an appetite for risk and people who seek long-term capital growth. The investor can use the auto-debit facility to invest in equity. Systematic Investment Plans or SIPs are a popular way of investing in equity mutual funds.

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7 Reasons Why You Should Invest in Equity Mutual Funds

Given below are the reasons for investing in equity mutual funds: 

1. Capital Appreciation:

One of the main advantages of investing in equity mutual funds is capital appreciation and you earn inflation-beating returns, albeit at high risk. Equity mutual funds offer higher returns than any conservative investment like Post office schemes, FD, PPF and NSC. Equity investments are risky and you must be careful before making the investments.

A high increase in NAV of equity mutual fund gives massive profits. You can accumulate a decent corpus by investing in equity mutual funds.

See Also: Equity Mutual Funds vs Stocks: Which Is Better?

2. Portfolio Diversification:

Investing in equity diversified mutual funds brings the diversification benefit. If one of the companies in the portfolio underperforms, the other well-performing companies make up for the losses. So, the risks of losses are minimized as it is spread across the equity portfolio.  

3. Financial Goal-Oriented Funds:

Equity mutual funds can be used to achieve both short term and long-term financial goals. Equity mutual funds are one of the best investments to grow your wealth as well as save money and bring in financial discipline.

These equity funds come in various categories like small-cap, mid-cap and large-cap. To generate a higher return you must invest in equity mutual funds for the long-term, as this is when equity performs well.

4. Tax Planning Option:

Tax saving mutual funds called ELSS enjoy Section 80C benefits, up to Rs 1.5 Lakhs a year. ELSS has a 3 year lock-in period. Equity mutual funds have the least lock-in, compared to other tax saving instruments like 5 year tax saver fixed deposit, PPF, NSC and so on.

The equity mutual funds offer better returns as well as greater tax savings, when compared to other financial instruments. The main disadvantage is equity mutual funds are affected by the ups and downs of the stock market.

See Also: 3 Reasons Equity Mutual Funds Are Good For You

5. Tax-Free Returns:

ELSS a type of mutual fund; enjoys Section 80C benefits. Short term capital gains are taxed at 15% + cess, while long-term capital gains are taxed at 10% on amounts over Rs 1 Lakh a year. Previously, ELSS enjoyed EEE tax benefits.

6. Professionally Managed:

You do not need to review investments (equity investments), or keep a check on the market performance of these funds. These funds are managed by professionals known as fund managers. Equity mutual fund is the best option for investors who have limited knowledge on equities. These equity funds are managed by professional fund managers on behalf of investors for a fund management fee.

7. Easy to Liquidate:

Equity mutual funds are highly liquid and can be sold whenever you need the money. The mutual funds can be redeemed at any point, whenever the investor is in need of money. It takes a few days for the money to come into the bank account.

See Also: What Supermarkets Teach You About Equity Mutual Funds?

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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