Finance

Types and advantages of equity mutual funds

Do you want to invest in equity mutual funds but hesitate due to the myths or lack ofknowledge? Equity mutual funds are good options for such investors who have inadequate knowledge or have a smaller amount to invest. Equity funds are professionally managed by qualified and experienced fund managers. And there are several types of equity funds investors can choose to invest according to their investment goals. Don’t get confused by the different types of equity mutual funds. Once you understand them in details, you will be able to choose the options suitable to your financial objectives.

Let’s understand the types to help you understand mutual funds better.

Types of Equity Mutual Funds

  • Shares

Shares are the units of the partial ownership in the company. They are traded via certain stock exchanges such as the National Stock Exchange or Bombay Stock Exchange.As the risk of investing in shares is quite high returns you receive can be equally substantial.

  • Large-cap equity funds

These are the funds that invest in well-established large-cap companies. Large-cap equity funds India has the potential to create stable returns while keeping the investment risk low.

  • Mid-cap equity funds

These equity funds are invested in mid-cap companies. As the name suggests, the risk level of investing in mid-cap equity funds is well-balanced better for investors with average risk appetite.

  • Small-cap equity funds

You might have guessed from the name that these types of equity funds invest in the shares of the companies having small market capitalization. These mutual funds are more volatile as compared to other types of diversified funds.

Benefits of investing in Equity Mutual Funds

  1. Portfolio Diversification

Investing in equity funds gets you exposure to various stocks at low risk. Moreover, you can start investing in a small amount of Rs. 500. This simply makes it easier to put different eggs in your basket. Equity funds are safer and affordable means in investment as compared to the direct investments in stocks.

  1. Professional management

When it comes to investment, we don’t want to leave anything to chance. Getting an expert’s help matters the most at such time. Investing in equity funds helps you ease this burden as they are professionally managed by expert fund managers. Fund managers spend quality time researching the past and future performance of companies before investing your money.

  1. Tax benefits

If you kept invested in equity funds for more than one year the returns are exempted from tax liabilities. Under Section 80C of Income Tax Act 1961,you can get the tax exemption of up to Rs. 1, 50,000 that considerably reduces the tax liabilities.

Equity schemes are a better option for investors who have a considerable risk of appetite.Those who have constrained time or experience in the investment market can also consider equity mutual funds to get moderate to high returns.

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