Do you have a long-term financial goal that you would like to attain? You may actually consider equity mutual funds as the best solution for you. The correspondingly safe instruments such as fixed deposit, PPF account/saving account etc; yield lower returns in comparison to other investment methods. But equity mutual funds can give a better return with a certain level of risk are involved in it. Let us seek to understand how the investing in equity funds could be profitable in the long run and why you should invest in equity mutual funds.
5 Reasons to Invest in Equity Mutual Funds
Let's understand why you should invest in equity mutual fund and what are the benefits of investing in equity mutual funds.
1. Diversification
This usually means investing in different sectors and companies so that the risk that affects one company or sector does not affect all your investments in that particular area. In this way, if a particular sector or a company is poor then it does not influence the total portfolio a lot.
Think of it like this: it is better to combine different choices instead of staking on something and risking to lose everything. Investing in equity funds provide diversification in the portfolio with professional help and, unlike direct investment services in a particular stock, has the tendency of not making you lose your money.
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2. Professional Management
Experts rightly claim that one of the crucial benefits of investing in equity mutual funds includes professional fund managers who help control and invest your money in equity mutual funds. The rest of the experts are in their field have been practicing their profession for many years and possess vast knowledge of the market.
They apply this understanding in compiling analyses of market trends, performances of various companies, and other economic factors for the purpose of investment management. This can greatly help to improve the odds of getting high income as compared to when an individual tries to manage the investment on his or her own.
3. Accessibility and Flexibility
Investing in equity funds is open to all regardless of the amount one may possess or the financial status of an individual. SIP investment facility is available from as low as Rs. 500 providing a good opportunity to start an investment journey.
It also has the flexibility of making payments in a fixed amount regularly, helping build your investment systematically. Secondly, it is easier to get rid of low-yielding investments that you do not want anymore simply by reducing the amount of investment you contribute, depending on your financial capability.
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4. Tax Benefits
Investing in equity funds can also lead to tax deductions, thus making it easier to save on taxes. ELSS is an Equity Mutual Fund that is used to avail tax savings under the Section 80C of the Income Tax Act.
You can claim deductions up to Rs. 1.5 lakh per year. Moreover, ELSS funds have the shortest lock-in period of three years compared to other Section 80C options like fixed deposits and PPF. Additionally, long-term capital gains (LTCG) from equity mutual funds are tax-free up to Rs. 1 lakh per year. Gains above this amount are taxed at a lower rate of 10%.
5. Potential for Higher Returns
So far, equity mutual funds have offered better returns for elaborate periods compared to other savings tools. The benefits of equity mutual funds is that it allow you to participate in such stock market growth, as the market generally experiences growth over time.
Furthermore, long-term investment means that one does not wait for frequent changes to occur so that they can invest, and this aids in avoiding market change, and often creates massive wealth gains.
Conclusion
Equity based mutual funds is one of the best investment plans in India since they are diversified, professionally managed, easily accessible, provide tax benefits and returns always show high expectations. It offers one a prime chance to invest and build up his or her generally desired financial potential.
If you are tired of the conventional forms of savings and investments and are now willing to consider a little bit of risk in focus with the potential of good returns then invest in equity mutual funds, this will suit your kind of investment.
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Top 5 Reasons Why You Should Invest in Equity Mutual Funds