Investing In Equity Mutual Funds - How It Benefits You!
Investing in equity market requires knowledge, risk-taking ability and patience to cope with the ever fluctuating nature of the market. Those who do not have these traits in them can choose equity mutual funds to participate in share market.
Understanding Equity Mutual Funds -
Equity mutual funds are type of mutual funds that invest the pooled money from investors into shares of various companies. The gains or losses arising from the rise or drop in prices of these shares in the stock market decide the performance of the mutual fund. In an equity mutual fund, the Net Asset Value (NAV) is the price that investors pay for each unit of the fund. As these funds invests in equities, NAV of these funds directly gets impacted by price fluctuations in stock market.
Invest In Equity Mutual Funds To Reap These Benefits-
1. Capital Appreciation -
Equity mutual fund investments offer capital appreciation when the NAV of a fund increases. NAV of a fund rises if the market value of that fund’s portfolio holding increases. When investors’ capital appreciates in value, equity funds re-invest the profit. Thereby, empowering investors realise long-term growth by way of compounding.
2. Dividend Income -
When equity funds earn profit in the form of dividend on the underlying stocks in its portfolio holding, it pays investors in the form of dividend income.
3. Tax Rebate -
Returns on equity mutual fund investments are exempt from taxes (returns on investments held for more than a year). That apart, dividends on equity funds are tax-free in the hands of investors.
4. Expert Management -
Investing in stock market requires knowledge of markets, patience, discipline and time. Investing in mutual fund comes with the benefit of expert professional management wherein an expert fund manager manages the pool of money invested by investors.
Investment in stocks do not provide much liquidity when the need arises, but investment in mutual fund units do. For instance, open-ended mutual funds units can be bought and sold anytime.
Conclusion - If you are an investor with a moderate risk appetite, but also wants widespread diversification in your equity portfolio, investing in equity mutual funds would be the wisest investment decision you can ever make.
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