Best Equity Mutual Funds

A fund that is made up of a minimum of 65% equity and equity-oriented securities is called an equity mutual fund, and these funds will suit:

a) Investors with Moderate to High-Risk Appetite

Equity mutual funds invest are deemed to hold high to moderate risks. Even the top equity mutual funds can come with price fluctuations and frequent ups and downs in the short term. Therefore, if you are an investor who holds a moderate to high-risk appetite, they are the best-suited funds for you.

b) Investors Who Want to Start Small in Equity Investments

Quite a lot of investors want to invest in the equity market but can't because they do not have enough capital. However, through equity mutual funds, an investor can start small - even with an amount as low as Rs. 100.

c) Investors Who Want to Save Taxes and Enhance Overall Wealth

Equity funds, especially ELSS Funds are useful for investors who want to have the best of tax-saving and long-term wealth creation together. They give investors the option to save with taxes through the tax-saving benefits of Section 80C of the Income Tax Act. An investor can reduce his/her taxable income by Rs. 1.5 lakhs with investments in equity mutual funds. Simultaneously, they also earn good returns from investments. 

d) Long-Term Investors

As mentioned above, equity mutual funds can be volatile in the short term. Although they can provide handsome returns in the long run, they are most likely only suitable for investors who are willing to invest for five years and more. 

e) Investors Who are Inexperienced for Equity Stock Investments

Many beginner investors want to invest in the stock market but cannot do so because they do not have the devoted time to track the market or enough experience to invest confidently.

Equity mutual funds provide these investors an opportunity to start investing in equity-linked funds. The investor need not worry about the market or performance with equity mutual funds as the fund manager will take care of everything and work on providing profits to the investors.

While finding the best equity mutual funds to invest in 2023, an investor will have to take a look at the following factors in detail:

1. Track Record of the Fund

Best performing equity mutual funds usually have an excellent track record of giving out the best returns over the last couple of years. The performance of these funds would have outperformed the benchmark and competitor funds. 

In order to find the best equity fund, you will have to examine the fund's performance over the last few business cycles. 

2. Objective of the Fund

Investments in any kind of equity need to be made only after assessing the final goals of the fund. Funds that perform well in the long run always have a clear objective because it helps them diversify the investment and offer better returns.

So, once the objective has been completely assessed, you will be able to map out whether or not the fund will give you enough yields. 

3. Fund's History

The right equity fund is found by its history. The funds with an extended history are considered to be a good choice. This is because you can know if a fund was performing well over a time frame, even in a bad market. This kind of data would not be available for new funds. 

So, before choosing a fund, look into its performance history and analyze the ups and downs in the last few years. It can help you estimate its futuristic performance.

4. Expense Ratio 

The expense ratio is the fee charged by the fund house to manage your investments. So, the lower these fees, the fewer expenses you will incur over your investments. Therefore, while searching for the best equity mutual funds in 2023, you will have to look out for a fund house that is not only secure but also offers you reasonable fees and charges over your investments.

5. Fund Manager's Expertise

An equity fund does not just perform well out of market directions, but it also has the fund manager’s expertise at hand. A well-performing fund, at most times, is known to have a fund manager with a great track record. This is because he is known to provide profitable returns over time.

A fund manager is a vital part of any equity fund investment. They can handle the investor's money, and it is his expertise that allows the fund to succeed. 

Checking up on the history, performance, and expertise of the fund manager gives you the assurance of investing under the administration of safe hands.

As already stated, investments in equity mutual funds involve risks in the short term; the risks can be of the following kinds:

a) Market Risk: A market risk results in losses for any investor because of poor performance of the market. These can be inflation, deflation, political unrest, interest fluctuations, and more.

b) Interest Rate Risk: Interest rate changes depending on the credit available to lenders and the demand from borrowers. An increase in the interest rate during the investment period can result in a reduction in the price of the security, which means it is inversely related to each other. 

c) Liquidity Risk: Liquidity risk is the difficulty of redeeming an investment without facing a loss in the value of the fund. This occurs for several reasons, like interest rates increase, changes in the value of currency, and more. Therefore, selling the funds and arranging money can sometimes be hard.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Q1. How long do I need to remain invested in equity mutual funds?

The tenure you need to stay invested in entirely depends on the objective of your investment. Typically, equity funds are open-ended, which provides you with the opportunity to sell the fund when you want to. However, it is advised to stay invested if you can see steady returns in the future.

Q2. What are the expected returns of equity mutual funds?

Mutual funds are known to provide higher returns than bank FDs (when it is the right fund). Therefore, you can expect returns of more than 13%.

Q3. Are equity mutual funds long-term investments?

You can stay invested in an equity mutual fund for long or short term, based on your financial goals. But, it is advised to stay invested for the long term to see positive returns. 

Q4. Which equity fund is the best to invest in?

There are different kinds of equity mutual funds, but the suitability of an equity mutual fund will be based on your financial and investment goals, risk appetite, and several other factors. 

Q5. Will equity mutual funds give me dividends?

In certain cases, an equity mutual fund can occasionally give you dividends and bonuses from the underlying companies it was invested in.