Equity Mutual Funds: A New Horizon for the Indian Investors
What is Equity Mutual Fund?
Mutual Fund investments have opened up new horizons for middle-class investors in India. Among different types of emerging Mutual Funds, Equity Fund is the most popular because of its high probable returns and flexibility. Many investors invest in Mutual Funds without knowing that they are investing in equity funds. So, proper knowledge about equity funds is highly necessary for those who want to invest wisely for attaining a specific financial goal in their life. Here is a short analysis of the Equity funds, their nature, characteristics, return prospects, risk factors and durability.
An equity mutual fund primarily invests in select stocks in the market. A mutual fund creates a portfolio for the investors arranging stocks on the basis of their market value. The mutual fund clarifies the percentage of holding of stocks of different companies in their respective documents. A Mutual Fund can be classified as an equity Mutual Fund if it invests more than 60% of its total assets in the equities or shares of different companies. The Net Asset Value (NAV) of a specific equity mutual fund depends on the daily market condition.
The fund manager of an equity mutual fund creates a portfolio choosing the equity shares of different types of companies like IT, healthcare, logistics, real-estates etc. The following factors prevail for what equity mutual funds have become so popular in the Indian market over the course of time.
Scattering Risk Factors
Equity Mutual Fund scatters the risk factor through diversification of the funds. The expert fund manager creates a portfolio that includes stocks of companies of different sectors and market capitalisation. Most of the equity funds are a perfect mixture of all types of funds like IT, healthcare, real-estates etc. Few are focussed equity funds that invest only in a specific type of company. Some of them invest according to market capitalisation; there are popular Large Cap funds, Small cap Funds, Mixed funds etc.
Flexibility and Liquidity
Equity mutual funds are flexible in nature because it provides you with the options to select the nature of fund as per your investment horizons. You can invest in funds according to the market capitalisation. You may choose comparatively consistent Large Cap Funds or the high potential Small and medium cap funds. You can invest a lump sum amount as low as Rs 5000 as well as in a systematic investment plan (SIP) with a minimum monthly amount of Rs 500.
Tax Payers’ Heaven
It would not be wrong if we term equity mutual funds as tax patterns’ heaven. The Equity Linked Savings Scheme (ELSS) funds provide you with the option to save tax under the section of 80C of Indian Income Tax. You can get a tax benefit of Rs 1.5 lakh investment in this scheme in a financial year. Almost all the leading Asset Management Companies (AMC) in India provide you with multiple options of ELSS mutual funds. You can save and save tax under these schemes simultaneously. ELSS funds have proven records of better returns than other tax-saving funds under the 80C section. So, the new-generation taxpayers are highly interested in these funds.
There are several other factors in equity mutual funds like lower expense ratio, lower exit load, higher return, online investment and verification etc that have made equity fund investors’ friendly. But it is highly advisable that you read all the documents carefully before you choose any mutual fund investment. You may consult an AMFI Registered Mutual Fund distributor for expert advice and guideline.
