Investing in the stock market demands a risky appetite as the market is volatile, and no one can predict the ups and downs. But if you’ve mastered that phase, there’s one more thing you should focus on now- strengthening your investment portfolio via equity funds.
This is a bit tricky but certainly not that hard to achieve. Knowing asset allocation is one of the most crucial parts of making a strong portfolio.
The ideal portfolio is balanced or extremely profitable. In short, it should give you peace of mind and does not hinder your capital to the extent that you lose a huge portion.
What is Equity Fund, and How Will It Help?
Investing in the company shares and stocks fall under equity funds. Investors either put their money in stocks or shares in equity mutual funds. There are three types of mutual funds – large-cap, mid-cap and small-cap.
Though all the money is not invested in the shares, debt assets and other market instruments ensure that you do not have to gamble all your money at once. Investing in equity does not mean that what worked for one will work for everyone.
Different Types of Equity Funds
There are different types of equity funds in the market as per the objective. Here are the types.
- Market Capitalization Based
These are solely focused on capital generation. This contains 5 sub-categories: small-cap, large-cap, mid-cap, large & mid-cap, diversified and multi-cap funds investment. The risk varies in all these types of equity funds, and as an investor, you need to align your financial objective with choosing which type of equity fund fulfils your goals.
- Thematic and Sector Based
In this, the funds will be invested in the sector with immense growth potential as per the past and current market performance. These sectors are pharmacy, agriculture, sports, automobiles, FMCG, and more.
Apart from this, there is a thematic investment; here, the investment is made in companies with a common theme. For example, it can be gaming, real estate, power, cement etc. This sector is risky as if there are some unfavourable conditions, the whole sector will lose. But if you’re an ultra-aggressive investor, this is an ideal investment option for you.
- Equity Linked Saving Scheme [ELSS]
Famously known for tax saving funds, the ELSS will allow you to claim your tax deductions on the capital you have invested in one year. Also, ELSS allows tax benefits on the long-term investment capital.
As an investor, you can claim a TDS of about Rs. 1.5 Lakhs but remember that there is a lock-in period of 3 years. The risk is less, but the returns are also moderate, so if you prefer to invest in a scheme that offers you profit without taking a risk, you can invest in ELSS.
Benefits of Investing in Equity Funds
Here are the major benefits that you need to know-
- You can generate high capital by investing in profitable equity funds. The returns in equity funds can easily beat inflation and accrue significant capital by investing in the funds for the long term.
- You can redeem the equity funds units at any time as the NAVs. Apart from ELSS, you can liquidate other funds.
- As an investor, you will get exposed to various stocks and shares of the mid, large, and small-cap companies. If you invest in muti-cap funds, you can diversify your portfolio and gain high capital.
- You can also invest in an equity fund via SIP, where you can make the contributions bi-weekly, weekly, quarterly or monthly. You can start investing from as low as Rs. 500.
These are the benefits and types of equity funds you should consider for investment. Equity funds are crucial investment instruments and generate higher capital while beating inflation. However, you have to be extra cautious about investing funds. As an investor, you need to know about the fund’s past and current performance in the market and whether it can generate capital.
As an investor, you should aim to build an investment portfolio that generates profit. Invest in different types of equities at the right time. If you are struggling to understand which fund to invest in, you can take the help of investment managers or fund houses to conduct the research.
And if you want to know more about equity funds, you can get expert advice and valuable information at Investment Simplified. The platform offers trusted advice on diverse financial topics.
Check out their website today to become an investment expert!