So you’ve finally decided to start your mutual fund investment journey. As you explore your options, you will find that the MF market has something to offer to every investor – risk-loving, risk-averse, short-term, long-term, and more. But, if you’re wondering if equity funds are the ideal pick for your investment portfolio, this guide will help you decide.
These funds invest a predominant share of their assets, as much as 60%, in stocks of companies. As a result, the company's performance in which the funds are invested plays a key role in determining returns. They are often broadly described as 'risky', but that's just half the truth. With equity funds, it is the investment horizon that you need to pay attention to. If you stay invested for the long term, you can build a healthy corpus.
The risk factor ranges from high to moderate, but it all boils down to risk diversification and portfolio rebalancing. Ensure that you spread the risk over a mix of equity, debt, and alternative market instruments. Also, sell and buy units from time to time to always maintain desirable asset allocation levels, and you have nothing to fear.
Building a balanced portfolio can prove to be pricey. If you cannot afford to pay a lump sum, simply opt for the monthly Systematic Investments Plans or SIP. You can start your investment journey with just Rs. 500 per month.
The equity market is highly volatile in the short run. However, the probability of being affected by market turbulence significantly reduces in the long run. These funds are ideal for investment goals like retirement planning, building an education corpus, etc.
Additional Read: Mutual Fund Trends to keep an eye on in 2021
ELSS, short for Equity Linked Savings Scheme, are the only tax-saving funds, and they are equity-oriented. Income Tax Act's Section 80C allows tax exemptions of up to Rs. 1.5 lakhs of your yearly taxable income. You can save up to Rs. 46,800 with these funds.
Additional Read: Direct Equity vs. Equity Mutual Funds: Which should be preferred?
Want to know about the best equity mutual funds available today? Compare funds on Tata Capital’s Moneyfy app. See our top picks, match the fund features with your investment goals, and build a balanced portfolio. Start investing in the equity market from the comfort of your home!