Equity funds are mutual funds that mainly invest in stocks. Professional portfolio managers manage these equity funds, and you can invest your money via SIP or lump sum. The portfolio manager will invest the pooled money in different stocks on your behalf.
Who can invest in equity funds?
Equity investments are subject to market risks. If the share market is performing well, equity funds tend to perform well, and you could earn profits. But, there can be scenarios where the share market may face a crisis, and the equity fund value may fall. So, investment in an equity fund should be based on your financial objective, time horizon, and risk appetite. It is proven that over a longer time horizon, equity funds are generally profitable. So, if you have a longer time horizon and risk-taking capability, you should go for equity funds.
How to invest in equity funds?
There are several broker firms and platforms where you can invest in different equity funds. You can also invest from the respective fund house website.
Step 1: Open an account with a brokerage firm or a fund house and create your investment account. All your investment information will be stored in your account.
Step 2: Fill up all the required details. This information will be needed to complete your KYC
Step 3: Complete your e-KYC.
Step 4: Start investing in the mutual funds according to your investor profile, either on your own or under the guidance of a financial expert.
Things to consider before buying an equity fund
- Risk
Equity fund investments are risky; they move as per the share market. If the share market is performing well, your return will be good and vice versa. So, as an investor, you should be aware of your risk capacity. If you have a longer time horizon, equity funds could get time to recover if there is a crisis in between. Always pick equity funds as per your risk capacity.
- Returns
Over a longer period, the return of equity funds has been consistently higher than bank FDs and other corporate bonds. The stock market has been performing extremely well. Nifty has crossed the 16,850 mark as of 30 August 2021. Equity funds are performing well and providing good returns. So as an investor, you can rely on equity funds for good returns.
- Advantages
- The mutual fund is managed by professional fund managers. They are trained to outperform the market.
- There is a huge diversification benefit. The pooled money is used to buy different stocks, so the portfolio enjoys diversification benefits, and the return tends to be stable.
- Disadvantages
- You will not have any control over the portfolio. So, if you feel that a particular stock is going to rise, you can’t recommend that stock to the portfolio manager.
- The charges are high, which reduces the overall return from the portfolio.
Are equity funds for you?
As an investor, you should be aware of your mutual fund investments. You need to select only those funds or investment avenues that are in line with your financial goals, investment horizon, financial standing, age and risk tolerance. If it still proves to be difficult to select the right kind of fund or investment avenue, it is prudent to reach out to a financial expert who can guide you on your investment journey.
Reach out to one today and start investing!
