When you wish to invest in stocks of different companies but cannot decide which one is the best stock, you can opt for equity mutual funds. They predominantly invest in equity stocks of various companies based on the underlying objective of the scheme. They not only give significant yields but also come with substantial tax advantages. Hence, equity funds may be the best choice if you invest in company shares.
The variety of mutual fund options available often perplexes novice investors. Mutual funds will likely be your best bet if you want to invest in a diversified portfolio. Mutual funds have significant advantages, like tax deductions. Additionally, they help you diversify your portfolio as they offer a wide range of stocks and bonds.
Equity funds are mutual funds that invest primarily in stocks. You put money into the fund through a SIP or a lump amount, and it invests the same in various equities on your behalf.
This article will explore the various types of equity mutual funds
Equity Mutual Funds invest in direct equity, based on the fund’s objectives as per the fund manager’s speculation and discretion. All mutual funds that have more than 65% exposure in equity stocks at all points of time are classified as Equity Mutual Funds as per the SEBI (Securities and Exchange Bureau of India).
Such mutual funds are often considered reliable for long-term capital appreciation investment strategies since they have the potential to produce wealth in the long run. These mutual funds are a fantastic alternative for individuals looking for long-term investments and exposure to the stock market.
Here’s how it works:
Investors invest in an equity fund plan via SIPs or a lump sum amount. The mutual fund house has a fund manager who invests the money received in a group of select stocks.
As per rules set by SEBI, equity mutual funds must invest at least 65% of the overall corpus amount in stocks or equity-related instruments.
Here is a breakdown of the broad types of equity mutual fund plans in India:
The money is invested in the top hundred firms according to market capitalisation.
(Market capitalisation is defined as the total number of shares of a particular company multiplied by the share price of the company).
Thus, the largest companies in India with the highest number of shares have the largest market capitalisation. They are also called blue-chip companies as they have grown over the years and hence provide sustainable and steady returns over time. Eighty per cent of the total investment in large-cap funds is in large-cap stocks.
The fund house invests in companies ranking between 101 and 250 positions as per market capitalisation. This ranking is determined by the total value of the company’s shares. These mid-cap funds can offer a higher rate of return than large-cap funds but at a higher risk.
The money is invested in companies with a market capitalisation of less than a Rs 100-crore limit and a ranking below 251. These funds assure high profits over the long run despite their volatility.
These offer portfolio diversity and reduced risk by investing in businesses across industries and market capitalisation.
These types of equity funds invest at least 65% of their total assets in equities and other equity-related assets. As they engage across market capitalization, they are allowed to have exposure to small-cap, mid-cap and even large-cap firms.
These equity mutual funds make investments in shares from specific sectors. Therefore, their success is based on the industry’s performance in which the funds are invested. They also provide better returns but carry higher risks.
These funds provide tax advantages to investors while investing predominantly in stock or equity-related products. Investments in ELSS are eligible for tax deductions under IT Act section 80C of up to Rs. 1.5 lakh. Additionally, there is a 3-year lock-in term for ELSS investments.
Here’s why you should invest in Equity Mutual Funds:
Mutual funds are a great way to invest your hard-earned money. They give high returns on investment and help you diversify your portfolio. However, there is no accurate way to calculate returns from these investments, so you have to use Jupiter Money’s mutual fund return calculator, which helps you to get an idea about the returns on investment if you invest in different schemes and at different frequencies.
Investing can be challenging when finances are handled manually and with a lot of tedious work. Jupiter Money provides a hassle-free way to invest in mutual firms for both your long-term and short-term needs, enabling investors to achieve financial freedom.
Jupiter is an online platform to invest in mutual funds without paying any charges or commissions. Whether you are an inexperienced investor, confused about investing in funds or a seasoned one looking for a reliable digital platform to invest in mutual funds, Jupiter Money is the best option.
If you’re still having trouble deciding whether to invest in a mutual fund, consider the benefits you get. The advice above will help you make an informed decision about where your money is best spent. If you do choose to invest, take it slow and remember to diversify to minimise losses and gain better returns in the long term.
Between its user-friendly interface, low management fees, and ease of use, Jupiter could be an excellent option for beginner investors.
Start investing today!
Mutual funds do not guarantee that you won’t lose money. The success of the equity and financial markets affects the loss and profit of mutual funds.
Investors with relatively high to moderate risk appetites may want to consider equity funds.
After purchasing shares, you are free to sell your fund investments at any time. However, depending on the fund you hold, there can be implications. For example, if you decide to sell your current shares before a set length of time, some fund managers impose an early redemption fee.
One must realise as an investor that mutual fund SIP is a voluntary commitment. Therefore, no penalties or fines can be levied if the investor chooses to end the fund scheme midway. Exit load fees, however, can apply only if the client redeems the fund.
It is impossible to determine the best mutual fund in a category without knowing what type of investor you are (i.e., an aggressive or conservative investor) and your financial goals (i.e., whether you are thinking short-term or long-term). And since no one can accurately predict stock market performance, even the most seasoned experts cannot guarantee any fund will always be “the best.” However, equities are known for growing over the long term, even in volatile times. So, as a rule of thumb, diversified equity funds are generally a good place for most investors over time.
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Priyanka Rao is a content strategist for Jupiter.Money, and specializes in writing on topics related to finance, banking, budgeting, salary & wages, and other financial matters. She has a passion for creating engaging content that resonates with audiences across various digital platforms. In her free time, Priyanka enjoys traveling and reading, which allows her to gain new perspectives and inspiration for her work. With a keen eye for detail and a creative mindset, Priyanka is committed to creating content that connects well with her readers, enhancing their digital experiences.
Prithvi Raj Tejavath is currently the Business Head - Investments at Jupiter Money, where he leverages his extensive experience in product marketing, business growth, and leadership. Prior to this, he held the role of Chief Product Marketing Officer and Chief Product Officer at Scripbox, a leading digital wealth management platform. His journey at Scripbox began after the acquisition of Upwardly, a company he co-founded, where he served as CPMO overseeing product and marketing. At Upwardly, Prithvi played a crucial role in making investment opportunities more accessible to a broader audience.
Before Upwardly, Prithvi was Vice President of Category Management & Growth at Urban Ladder, where he managed the P&L for their furniture, décor, and mattress divisions, and successfully launched the Decor and Mattress business units. Earlier in his career, he founded BuynBrag.com, India's first social shopping website focused on home and lifestyle products. Under his leadership, BuynBrag was acquired by Urban Ladder in September 2014.
With a background in online product management, growth strategy, and marketing, Prithvi has consistently demonstrated his ability to scale businesses and drive innovation across sectors. His entrepreneurial spirit and strategic acumen continue to shape his contributions to the financial and investment landscape.
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