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Equity Mutual Funds

  • Akshatha Sajumon
  • 14 Jun
  • 3 minutes

Equity funds

Equity is the best asset class among the Mutual funds which offer higher returns of different market caps (large, medium and small caps). Equity funds buy the stock of companies listed in the stock market and offer a variety of equities with greater flexibility.

Why not buy Stocks Directly?

This is the next question that hit a mind when you speak on “Equity funds”. Firstly, think about how you would know which stock to buy? Because, if you are new to investing, then opting for the wrong stock will cost your money and peace of mind. When you decide to buy a mutual fund, you outsource your decision to the Stock Experts.

There is “Fund House” where a team of specialists and analysts track the companies, markets, politics and interest rates to predict the future of stocks. Based on their reports, AMC (Asset Management Company) will help you to build your portfolio on stocks.
You can invest in equity mutual funds through a direct plan. Every mutual fund investment you make will have two variant- direct plan and regular plan. While Regular Plan bears a commission and direct plans are absolutely commission free. Hence, you get more returns on your investment with a direct plan.
You can invest in Fisdom – Direct Plan Mutual Funds where it provides you an advantage of Zero Commission and Zero Fees.

Who needs to invest in Equity funds?

Your decision on investing Equities will depend on the factors like risk-bearing capacity, investment horizons, return expectation.
Suppose you want to make an investment for a period of 5 years or more, then you can buy Large-cap equity funds because your returns do not fluctuate more and it best suits for the investors who are risk-averse.
If you are willing to take a greater risk than as compared to large cap, you may invest in mid/small caps.

Things you need to consider as an investor before investing in Equities:

  • Objective: Be sure about your objective, decide whether your objective is income generation or wealth creation. Income generation is required for a near-term goal and you will stay invested in fixed-rate products.
    For wealth creation, you have to hold assets for a long period and wealth creation depends on the quality of asset and price others willing to pay.
    Fund type: There are a variety of classes in Equity (small-cap, mid-cap, and large-cap). Each class has a different level of risk and returns associated.
  • Cost: Your Equity fund charges an expense ratio to manage your funds. SEBI has set up an upper limit of expense ratio as 1.05%.
    Financial goal: You’re establishing these funds because to meet your future goals. Your goals can earn higher returns, early retirement planning. Children marriage, etc.

How do you Evaluate Equity funds?

Based on certain parameters, you will evaluate the Equity funds:

  • Fund performance based on return on investment which is considered as an important parameter for the selection of funds.
  • The fund you select should have a clean and long history of 5 years because to ensure that the fund has seen all the market cycles and,
  • The risk-return ratio becomes an important factor to select the fund and “Sharpe Ratio”, the higher the ratio, the better the risk-adjusted returns for that funds.
    (Sharpe Ratio: how much excess returns you can receive for bearing extra risk)

Fisdom

You can invest in hand-picked funds through Fisdom which is India’s most trusted Mutual fund app. However, remember to choose the right investment option that is based on your risk appetite and investment goal.

It’s never too late to make the right choice!

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Akshatha Sajumon

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