Entrepreneurs often face a ‘Catch 22’ situation when kickstarting their business. The catch is that they need money to make money. And, often funds come from hard-earned savings, angel and venture investors, or business loans.
While all three are viable options, another avenue can multiply wealth without any strings attached. We’re talking about equity mutual funds for youngsters who wish to start or scale their entrepreneurial endeavour.
5 reasons why budding entrepreneurs must invest in equity funds
Equity-linked funds invest their corpus in stocks of different companies. The primary aim of these funds is to generate excellent returns by diversifying investment across different companies.
Here’s why you should invest in equity funds:
1. Funding the future capital requirement
Equity funds are known to generate a higher rate of return as compared to term deposits and debt-linked funds. You can reinvest these returns into your business whenever the need arises.
Now, we’re sure you deposit the majority of earnings back into the business.
However, if any particular year your profits are not up to the mark, or you want to launch a new product range, you can liquidate your equity funds quickly. With time, returns from these funds will only grow your secondary capital base that will lie untouched until you liquidate them.
Additional Read – Five reasons why your 20s are the best time to start investing
2. Achieve financial goals
Equity investments for entrepreneurs also help meet their personal financial goals. How? By appreciating comparatively faster than most other financial assets.
So, choose an equity-linked fund depending on your risk appetite and investment horizon. Don’t worry; not all equity funds are equally high-risk investments. The degree of risk varies from fund to fund.
However, if you do want to invest in a high risk-return equity fund, we recommend a long-term investment horizon, as that way, you most likely will negate the chance of losing any money.
3. Diversify business without physically diversifying
Countless entrepreneurs dream of diversifying their businesses. But, for every bifurcation to succeed, you need money, acumen, staff, and customers. Simply said, it’s not easy to diversify without incurring expenses, and the risk of failure is also high.
But, when you invest in equity mutual funds, aren’t you already investing in a diverse group of businesses? Yes, you are! In fact, here, you end up enjoying the good parts of diversification and avoiding the pains that come with it.
4. Closely regulated
Young entrepreneurs can’t afford to invest in facile instruments that are loosely regulated but promise high returns. With equity funds, you get the latter, but not the former. We mean, these funds are strictly regulated by the Securities Board of India (SEBI).
SEBI mandates excellent transparency within the equity fund market. Its policies ensure that every fund discloses its monthly portfolios, periodic expense ratios, and Net Asset Values (NAV). This information is then used by credible independent research agencies to accurately rate the funds for the benefit of future investors.
5. Convenient to buy and liquidate
You can purchase equity funds online. What’s more, unlike individual stock investments, you don’t need a DEMAT or a broker account to park money in this investment.
The bottom line
Given this bouquet of benefits, budding entrepreneurs must think twice before reinvesting all of their profits back into the business.
Want to start investing in equity funds? Do it online with Tata Capital Moneyfy. Our user-friendly digital portal allows you to compare and buy different types of funds, including equity-linked funds.
You can also create your account with us using your smartphone. Quickly download the Tata Capital Moneyfy app, and start investing today!