Mutual funds raise money from many investors and form a portfolio that is invested in various businesses and lucrative opportunities.
Equity mutual funds are mutual funds, which invest most of their portfolios in company equity shares. According to its investment mandate, the equity scheme invests, meaning that the “large-cap” scheme will not invest in small-cap firms, the “thematic” equity scheme will invest in equities around a specific theme, etc. Equity funds can be growth and value-based, and this is the basis of the way for the selection of stocks.
Upon allocating the majority of the corpus in proportionally to the investment mandate between firms, equity mutual fund schemes allocate the balance if sufficient to hold the fund liquid to satisfy fund shareholder withdrawal requests for securities and money market instruments.
Equity mutual funds are considered more volatile than other forms of mutual funds, as the bulk of the portfolio is invested in equities with no prior warning or which may fall. While the risk is high, the potential reward (profit) is also high. The right investment is a well-researched and well-managed equity scheme – As it means, the calculated risk is being done by those who understand the functioning of the market.
Inflation-beating returns: Historically, equity fund schemes have been able to generate market-beating and inflation-beating returns, among all other investments. Most secured investments, such as fixed deposits, recurring deposits, etc., offer an interest rate that, after accounting for inflation, offers no growth in the value of money.
Diversified Portfolio: Investment in equity mutual fund schemes ensures that shareholders can hold a large number of shares of different companies and through various business structures, disciplines, industries, etc. Having a wide range of stocks in one’s portfolio means that there are no major one’s losses occur that cannot be offset by gains in any other segment of the funds.
Capital appreciation: Equity mutual fund scheme is the only real option for those who want to invest their capital for medium to long term and expand as one of the few financial products that provide real market and inflation-beating returns.
Tax Benefits: Equity Linked Saving Schemes or ELSS as it is commonly called, can save up to Rs 1, 50,000 annually from taxable income by investing in this route. ELSS is also the only tax saving investment under Section 80C that has received such high historical returns — no other Section 80C was able to match the profits produced by mutual funds.
Expert Management: Many equity mutual fund schemes are operated by professional fund managers with the advice of market analysts. Live monitoring of investment options and possibilities for investment facilitates risk mitigation and makes it clear which options to invest in.
Liquidity: Stocks and bonds are traded daily in the world’s major exchanges. Although not immediately liquid after withdrawing funds from a savings bank account, the proposed liquidity is higher than most other mutual fund schemes or investment schemes.