Equity Funds

Equity Mutual Funds: These funds invest maximum part of their corpus into equity holdings. The structure of the fund may vary for different schemes and the fund manager?s outlook on different stocks. The Equity funds are sub-classified depending upon their investment objective, as follows:

  • Diversified Equity Funds

  • Large Cap Funds

  • Mid-Cap Funds

  • Small Cap Funds

  • Sector specific Funds

  • Tax Savings Funds (ELSS)

  • Index Funds

Equity investments rank high on the risk-return grid and hence, are ideal for a longer time frame.

Balanced / Hybrid Mutual Funds:

These invest in both equities and fixed income securities which are in line with pre-defined investment objective of the scheme. The equity portion provides growth while debt provides stability in returns. This way, investors get to taste the best of both worlds.


Ideal Investment Vehicle for Investors :

Moreover, Equity Funds have certain benefits that no other funds have, these are:

  • Liquidity: Stocks are traded in all major exchanges in the world, every day. This makes them a highly liquid investment. Equity mutual fund schemes are liquid. They offer you an opportunity to redeem your investments at any time (Except for Close Ended/ELSS Funds). That means you can redeem all your investments in the time of need. You can even invest more in equity mutual fund schemes during the market fall to buy units at lower NAV. Such liberty of investing and redeeming gives you better control over your investments..

  • Dividend: Investing in blue chip companies, usually gives the investors a steam of regular income in the form of dividends. These companies usually pay out regular dividends in good & bad economic times, typically paid quarterly. Having a diversified portfolio will ensure a steady stream of income throughout the year. Different companies have different cycles, so investors are guaranteed a pay cheque every month.

  • Capital Appreciation: This is one of the primary benefits of equity fund investments. As a company grows & earns profit, it usually chooses to reinvest the profit to grow through increasing market share, product developments, etc. With the increasing growth of the company, the market price of the stock increases, leading to capital appreciation for the investors.

  • Diversified Portfolio: Equity funds have widespread diversification, with very small initial investment. This means buying stocks of different companies at different times in different economic sectors. This is helpful in ways that if a stock drops at the exchange the other stocks can make up for the loss.

  • Professional management: Investments are always surrounded by a degree of uncertainty. An investor is scared of investing due to lack of adequate knowledge & time, self-discipline, or investing experience. Mutual Funds fit in perfectly in this situation as they have an inherent design to tap professional expertise to manage investments which, in turn, relive the stress of the investor.

  •  Systematic/ Regular investments : Equity mutual fund schemes avail you a facility to invest small sums at regular intervals through systematic investment plans (SIP). SIP makes it simpler for the beginners to invest in equity mutual fund schemes. These small sums that you invest regularly are invested to buy stocks. This also develops a regular habit of investing which is useful in long term wealth creation.

  •  Tax benefits : If the investment period in equity mutual funds scheme is more than one year the capital gain is exempted from tax liabilities. Government of India also provides tax rebate for Equity Linked Saving Schemes (ELSS) u/s 80C of Income Tax Act 1961. You can invest into ELSS and deduct upto Rs. 1,50,000/- from your taxable income to effectively reduce your tax liability.

 Click Here to know about Taxation for Mutual Funds .