Are you looking to invest money in equity funds? Do you hold back every time before investing in mutual funds in India due to the lack of knowledge? If so, you won't have to worry anymore before investing money through equity funds.
When it comes to equity funds in India, your money is managed by a professional investment manager. Therefore, investing through equity funds is a sensible move in case you are a novice or lack experience in this field.
Given below are a few benefits of investing through equity funds in India.
- Professional fund management
You can take the assistance of an asset management company (AMC) that excels in research, analysis, and trading. They also have a more comprehensive industry outlook compared to the amateurs and DIY (Do It Yourself) investors. Professional fund managers continuously monitor economic, geo-political, sector, asset class, and stock level developments at a micro-level thus enabling you to make maximum profit.
- Portfolio diversification
Portfolio diversification helps to reduce the risk of losing money. They are affordable and diversified models of investing compared to direct investments in stocks. It means buying stocks of different companies at different times in different sectors.
In case a stock drops at the exchange, the loss incurred by you won’t be much since you will have other stocks to make up for the loss. If you are doing it yourself, you might find it difficult to diversify across stocks/sectors because of the large amount of capital you need to buy multiple stocks and select and monitor the portfolio.
Equity funds in India are liquid. This means that you can sell them any time you want. You can get your money from selling a stock within a week.
- Tax benefits on investment
The current tax law in India states that you are subjected to long or short-term capital gains tax to buy or sell stocks in your portfolio. For instance, if you hold a stock for three months and another for six months, you have to pay tax for the short-term capital gains tax for the first tax and long-term capital gains tax for the second one.
However, this is not required in the case of mutual funds. You have to pay capital gains tax based on your investment period. Therefore, in the first case, you are taxed at the stock level, whereas you are taxed at the portfolio level in the second one.
- Small ticket size
In the case of mutual funds, you can start by buying a well-diversified portfolio for as little as Rs.500. However, if you directly try to buy a diversified portfolio, you will need relatively large amounts of funds.
Mutual funds in India maintain transparency since they are closely regulated by SEBI (Securities and Exchange Board of India). You can find the month-end portfolios of every fund on their website.
We hope the information mentioned above on the benefits of equity fund investments will prove to be helpful to you.