Equities are pooled investment that draws money from various investors to garner a considerable corpus to invest in various stocks. Thereby, they are also called stock funds which are witnessing rising popularity as no investment avenue can generate as good returns as equities. Fund managers select the stocks to invest in, considering the objective.
The Equity Funds manager collects money from several investors and invests it in various investments to form a portfolio. The multiple benefits make it a profitable avenue for you to put your money:
Diversification
Equity funds offer diversification in many ways. They invest in several stocks, various sectors, and other asset classes. As an investor, you can own a share in equities of companies across multiple capitalisations and pan sectors. You benefit from the profits and reduce the risk with even fund distribution. Also, the presence of fixed income securities and other money market instruments further diversifies and balances the investment portfolio.
Professional management
Analysts with experience and expertise in fund management manage Equity Mutual Funds. They research and analyse the various stocks and market trends and aim to outperform the benchmark indices. They generate superior returns than the market indices for their investors. Thus, many investors who lack the skill, willpower, or time to track the market or predict the stock performance should invest in Mutual Funds.
Risk mitigation
Owing to diversification, where the fund corpus evenly spreads over various stocks, it also spreads the associated profits and risks. When one stock underperforms, the other picks up. Similarly, if one sector falls, the other balances the portfolio, reducing the loss incurred.
Wealth creation
Equities generate the highest returns among all kinds of investments. They can offer inflation-beating returns to help investors create a good corpus in the future. If you have long-term goals of capital generation, invest in them. They involve risks but bounce back if you hold them for a long duration. However, you can also invest in Debt Funds like CPs, CDs, Corporate Bonds, Treasury Bills, Government Securities, etc.
Cost-efficient
Investing in equity schemes is cost-efficient. You can be a shareholder in various companies through small investments without a high capital requirement. As the fund size grows, the amount spreads over more fund units, making the cost cheaper. You can invest in a lump sum and SIP investments with an amount as low as Rs. 500 on the Mutual Fund app.
Liquidity
The sale and purchase make online Mutual Fund highly liquid. Similarly, investors can quickly redeem the units whenever desired. Once redeemed, the money equal to the unit value when sold gets deposited in your account within a few days.
Dividend income
Under a dividend plan, you get dividend income either monthly, quarterly, bi-annually, or annually. A dividend is the cumulative profit of all stocks. The profits earned from an Equity Fund are divided among all investors as per their unit holding after deducting applicable charges.
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