The investment market is full of opportunities. Investors can choose from a wide range of securities that can help them reach their financial goals over specific investment horizons. For most investors, mutual funds remain their preferred investment instruments. Among the various kinds of mutual funds available in the investment market,
equity mutual funds are a popular choice. These funds typically aim to generate higher returns for investors. The fund manager invests in shares of companies with different market capitalisation. Here are 4 advantages of investing in equity based funds.
- Equity based funds are professionally managed
When it comes to share market investments, it is best to invest in securities managed by experts in the field. The great thing about equity linked mutual funds is that they are managed by professional fund managers who know the ins-and-outs of the investment market. Such managers study the market on a daily basis and make investments by predicting market fluctuations. They also refer to real-time data as well as past-performance reports of funds before making any investment decisions. As such, you can rest assured that your money is in safe hands when a fund is managed by a reputed, professional fund manager.
- Investing in equities can lead to capital appreciation
One of the most basic reasons why investors prefer to invest in equity linked mutual funds is that it has the potential to appreciate the capital invested. An equity based fund is one of those rare funds that provide returns that can help beat inflation. As it always happens in the stock market, if the price of the stock rises, it automatically results in capital appreciation. If you make well-informed investment decisions over a good period of time, you can truly create a good corpus over time, by strategically investing in equity based funds.
- You can benefit from portfolio diversification
A diversified investment portfolio is crucial if you wish to mitigate the risks associated with share market investments. This is a great benefit you can get form investing in
equity savings schemes. By investing in equity based funds, you can spread your investments over in different sectors, which can help reduce the risks associated with losses on investments in future. In the event of market volatility and under-performance; those stocks that are out-performing can make of for losses incurred by the under-performers. This helps minimise market risks and losses on your overall investment portfolio.
- You can liquidate your investments whenever you like
The great advantage of investing in mutual funds is that they can be liquidated easily. Since equity oriented funds fall in the general category of mutual funds, this liquidity benefit is associated with them as well. You can easily get back your corpus in your savings bank account when you invest in equity based funds. It is possible to redeem the fund (partially or completely) at any given time; especially when you find yourself facing a financial emergency. Moreover, you can invest in these funds through SIPs, which you can stop anytime. Pre-term investments are credited to your account in a week whereas matured funds are deposited within 3 days.
Final word: Equity funds produce higher and better returns than both, fixed deposits and debt funds. However, the returns earned by investors, largely depends on the performance of the company. Since these funds have the ability to provide higher returns, most investors, prefer investing in them. However, equity based funds are ideal for investors with medium-to-high investment appetites. If you consider yourself a conservative investor, you should stick to investing in
debt based mutual funds.
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