Updated on March 12, 2023
A mutual fund which invests its assets in stocks of different companies based on its objective and certain other parameters is called an Equity Fund. An equity fund is a good option for investors who want to take exposure in stock markets and are looking for long term wealth creation through capital appreciation. Equity fund is managed by professional fund managers with expertise in this field and tries to generate better returns for the scheme and in turn, the investors. The fund comes with some level of risk as its gains are linked to the market performance of stocks it invests in.
What are the types of equity funds?
Equity funds can be broadly categorised as:
a. Large Cap Funds
b. Mid Cap Funds
c. Small Cap Funds
d. Large & Midcap Funds
e. Multi Cap Funds
What are the benefits of Equity Funds?
Equity Funds come with certain benefits to investors like:
1. Diversification – Equity funds invest in a diversified portfolio across market capitalization, which helps in reducing the risk.
2. Better returns – Equity funds give investors an opportunity to earn inflation beating returns in the long term
3. Professional Management – Equity fund managers are constantly tracking opportunities in the market and monitoring the fund performance
4. Convenience – Investors can invest online/offline and also use facilities like SIP/SWP with easy entry and redemption options
How are equity mutual funds taxed?
If Equity fund is held for 12 months or more, Long Term Capital Gains (LTCG) tax will be applicable @ 10% (beyond INR 100,000 per FY). In case the fund is held for less than 12 months, Short Term Capital Gains (STCG) tax will be applicable @ 15%.