In this article

  • 1) Why Should I Invest in Equity Mutual Funds?

  • 2) Who Should Invest in Equity Mutual Funds?

Why Should I Invest in Equity Mutual Funds?

When investment is considered, every investor thinks of gaining good returns on it. As far as gaining good returns is considered, equity mutual funds are the best because of its idealistic potential of generating high returns.

Equity mutual funds invest directly in company’s shares. It simply means that an equity investor is a proportionate owner of a company's business and profits and losses. Hence, equity mutual funds have high returns potential.

Here are the advantages of equity mutual funds so that investors know of why should they invest in equity mutual funds:

  • Expert management: Equity funds are monitored by experts with an immense knowledge of mutual funds. These expert fund managers know every aspect of mutual funds. They analyse the markets and alter funds (whenever required) accordingly to leverage the market trends.
  • Tax benefit: ELSS (Equity Linked Savings Scheme - a type of equity fund) as per the Section 80C of the IT (Income Tax) Act, 1961, offers tax benefit of up to ₹ 46,800/- by investing ₹ 1,50,000/-
    For other equity mutual funds, tax is levied as per the STCG and LTCG norms.
  • Diversification: This reduces the risk exposure of equity funds due to the widespread of your investments across the stocks of various companies. This helps to spread out your risk across various instruments.
  • High returns potential: Equity investing majorly invests in stocks of companies. Stocks represent proportionate ownership of a company's business and its profits and losses. Due to this, they have high returns potential that can outpace the market average.
  • Convenience: One can invest in one-go with lump sum investment mode or like an instalment with SIP investment mode. For monthly salaried employees who can’t invest in one-go then SIP is the best option for them.
  • Liquidity: The redeemed amount from equity funds are credited to your bank account in three days due to which equity mutual funds offer high liquidity.
  • Affordable: One can start investing with an amount as low as ₹ 500/- in equity mutual funds by starting their SIP at a predefined time interval. This makes it easier on our wallets when it comes to investing.

Get a detailed idea about the advantages and the disadvantages of equity mutual funds

Who Should Invest in Equity Mutual Funds?

Investors should analyse their risk appetite and their investment profile and then invest accordingly. Once you analyse your investment profile, see below which category you fit in. Below categories of investors may invest in equity funds:

  • Long term investment period: Investors with a long term investment period should invest in equity funds because they can yield superior returns in the long term.
  • Investor looking for high returns: High returns is the essence of equity funds. Such type of investors who actively want to take risk for high returns should allocate money in equity funds.
  • Young investors: Young investors have a high risk appetite and long term investment period making them an ideal type of investor suitable for investing in equity funds.
  • Market-savvy investors: Investors who have a good knowledge in markets and are well-versed with the market trends can definitely invest in equity mutual funds.
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Why should investors consider equity funds?
Equity mutual funds have idealistic potential of gaining high returns. Along with optimum diversification, tax benefits and other benefits of equity funds. This is why investors should consider investing in equity funds.
Why can young investors invest in equity funds?
Young investors have a high risk appetite and long term investment period.vThese characteristics get in line with equity funds.
Who can invest in equity funds?
Investors with a long term investment period, investors seeking high returns, market savvy investors and young investors can invest in equity funds but they should analyse their investment profile first and then invest in it.