Some of the best mutual funds in India comprise of equity MFs. The attractive returns are what makes it a must-have investment for many. Investors who have the temperament for riding the market volatility can look at Equity mutual funds as a good investment option.
People who have locked their savings in traditional schemes like NSC or fixed deposit will find that equity mutual funds will align better with their risk-taking capacity than pure equity-based investments. However, there are many things you need to know about this type of investment before you go for it. Here are the top 6 things worth knowing about equity MF –
1 – Wider stock spread for lower volatility
The stocks picked under this type of MF is diversified across multiple sectors. By spreading the risk, the potential of incurring losses goes down significantly. As compared to a single stock there’s a better cushion against risks. In case of market movement, the wider spread ensures that there is no substantial loss to the fund occurring due to one bad performing stock.
2 – Tax efficiency
These equity MFs are considered as ELSS (Equity Linked Savings Scheme) this provides tax benefits to investors. If you have invested in the type of MF, then you are eligible to avail of tax benefits up to Rs. 1.5 lakhs under section 80C.
3 – Better aligned with your wealth creation goal
Many of the funds are open-ended. This facilitates the potential to associate the investment with one or more of your wealth creation goals like retirement or child education. For investors looking at more than 5 years horizon, the yields from such funds would be attractive.
4 – Simplified redemption
Getting into such open-ended schemes is simple. You can link an ECS in your bank account for equity mutual fund SIPs. Even withdrawal is a simplified process. In order to redeem the units, all you need to do is sign a redemption form. Typically, it takes around 3 to 5 days to get the money transferred from your equity mutual fund to bank account.
5 – Beat inflation better
Some of the best mutual funds in India offer compounded returns to help multiply your investment over a particular period of time. If you choose dividend re-investment, then you can pour in a better amount into the fund, thereby improving your yield generation potential.
6 – Systematic Withdrawal Plan possible
The good thing about an equity mutual fund is that it is not only easy to get in through SIP, but also easy to redeem units through Systematic Withdrawal Plan (SWP). If an investor has an urgent need (medical emergency or hospitalisation) or wants to plan monthly withdrawals, this feature comes in handy. He can withdraw a set amount to meet his needs.
To wrap up
Do make sure to take note of these points so that you can make an informed decision in choosing from among the best mutual funds in India dealing in equity mutual funds.