Why Should You Invest in Equity Mutual Funds?

16 September 2022
4 min read
Why Should You Invest in Equity Mutual Funds?
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If you are looking for a way to invest in the stock market, then you have come to the right place. Equity funds are a great way to build your wealth. They allow you to be involved in the management of your own investments and make them grow.

Equity mutual funds invest only in stocks. One compelling reason to invest in equity mutual funds is that you don’t have to spend significantly. Even a small sum of Rs.500 can get you equity exposure.

Investing in equity mutual funds is a great long-term investment strategy for a number of reasons. First of all, the market in India has grown tremendously over the last few years, making it more accessible to investors who may not have been able to invest before. The growth of the Indian economy has also led to a significant increase in demand for equities as well as an increase in competition among various investment funds.

The increasing popularity of these products has meant that there are more opportunities than ever before for investors to make money off their investments by investing in equity mutual funds.

The beauty of investing in equity mutual funds is that they allow you to benefit from both short-term and long-term growth simultaneously. In addition, they have lower fees than other types of investments, which means that they can be used by anyone with even moderate amounts of money saved up.

Reasons You Should In Equity Mutual Funds

With this growth comes a number of mutual funds to choose from. In India, Equity Mutual Funds are one of the most popular investment options for individual investors and institutions.

There are a number of good reasons why you may want to consider investing in an Equity Mutual Fund in India:

1) Low Cost

The cost of investing in an Equity Mutual Fund is typically much lower than other types of investments such as fixed deposits or bonds. Because there are no commissions involved, it means that you can invest a significant amount without incurring high transaction costs.

2) Diversification

Equity Mutual Funds are a good way to diversify your portfolio. By investing in equity mutual funds, you can diversify your portfolio and get exposure to various sectors. You can also choose between various instruments like stocks, bonds, commodities, and real estate.

3) Tax Benefits

Some equity mutual funds such as Equity Linked Savings Schemes (ELSS), provide tax benefits under section 80C of the Income Tax Act, up to a maximum of Rs 1.5 lakhs annually.

This scheme has a lock-in of 3 years which is the lowest when compared with any other avenues such as five years fixed deposit, Public Provident Fund, NPS, etc.

4) Capital Appreciation

One of the main benefits of investing in equity funds is to get capital appreciation. It is an instrument that can provide you with high returns, which is capable of beating inflation year after year.

Also, you can also accumulate inflation-beating returns. If there is an increase in stock prices, it would reflect appreciation in the invested money. One can collect a good amount of wealth over a period. 

5) Professionally Managed

Equity Mutual Funds in India are professionally managed by experienced and qualified fund managers, who are backed by a team of professionals. The fund promoters or the management company or both contribute money to these funds to start off their business.

These equity funds are also known as open-ended mutual funds. These funds can be liquidated on the day of maturity or at any time before that. The investors can buy units of these funds directly from the stock brokers or through an online website and redeem them at any time for cash. They do not have to pay any charges for this service.

6) Highly Liquid

These mutual funds are highly liquid because they do not require any prior notice before redeeming them for cash. The investors can buy units directly from stock brokers and redeem them at any time for cash without incurring any charges for doing so.

So Should You Invest In Equity Mutual Funds?

Yes, very much if you seek to earn better returns than a fixed deposit and wish to reach your financial goals faster. Your decision to invest in equity funds should be guided by your investment objective, your investment horizon, and your risk-taking ability.

Typically, an investor who is looking to invest for more than five years should look to invest in equity funds. Equity funds are not very suitable for relatively short-term, owing to volatility in the market. 

Conclusion

There are many types of funds that can be invested in order to get a better return on one's investments. Equity funds, which invest in stocks, are one of many other types of funds. These funds have proven to provide a higher rate of returns over the long term when compared to other market-related instruments in India. 

Overall, equity funds are the best way to make money from the stock market and also to save for your future. Equity funds also have better returns than fixed deposits. So if you have a long time horizon, choose equity funds over fixed deposits to enjoy your money more.

Happy Investing!

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Groww Invest Tech Pvt. Ltd. (Formerly known as Nextbillion Technology Pvt. Ltd) Ltd. do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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