It is a tough call to choose the best equity mutual funds from number of best equity mutual funds in India. Since the inception of mutual fund investments, many retail investors have move from traditional investment asset classes to mutual funds.

Out of all mutual fund types, equity mutual funds have emerged as the most preferred type of mutual funds among the retail investors. Many investors feel confused while choosing investing in mutual funds over stock market. Through this article we will explore various investment opportunities and benefits offered by Equity Mutual Funds.  


What is an Equity Mutual Fund?

Mutual funds create a pool of money collected from number of investors to invest in various asset classes like stocks, securities, bonds etc or combination of these asset classes depending on the collective financial objective. 

Equity Mutual Funds are those mutual funds who predominantly invest this pooled money in equity shares of multiple companies.

Most equity mutual funds allocate the investment in share market however some equity mutual funds also allocate a portion of investment in debt securities to maintain the liquidity.

Equity mutual funds offer higher returns as major part of the investment goes to equity shares with a well calculated risk. Fund managers of equity mutual funds are very responsive to market fluctuations and well aware about the functioning of the share market.

It is mandatory to get approval from the Securities and Exchange Board of India (SEBI) before launching a fund scheme. SEBI also regularly monitors these schemes throughout its life cycle.

How does Equity Mutual Fund work?

The working of equity mutual fund schemes is quite similar to every other mutual fund scheme. Power of compounding plays a very crucial role in mutual fund investments. After detailed research and analysis on various companies, investor’s money is invested in stocks and shares of such multiple companies which are going to perform well in near future.

Most equity mutual funds invest at least 65% of the total pooled money in equity instruments while investing minimum 10% in debt schemes to maintain the liquidity.

Is it good to invest in Equity Mutual Funds?

Equity mutual funds invest the major corpus in equity market and aim to generate higher returns by taking well calculated risk in investing in stocks of multiple companies. Although the equity mutual funds are comparatively riskier than debt funds as they are depend on equity markets however they also offer higher returns as compared to debt instruments during long term investments 

What is Equity Mutual Fund SIP?

SIP means systematic investment plan. An investor can invest in equity mutual funds in a systematic way through SIP by regularly investing a predefined amount on a monthly, weekly on quarterly basis. 

You can invest in equity mutual funds by paying a lump sum and purchase the equity mutual fund units at one go or you can systematically divide your fund to make regular investments for reducing the risk from market fluctuations.

For example, you can invest Rs. 24,000 directly in equity mutual funds at one go or you can divide your investment in 12 equal parts for 12 months and invest Rs.2000 every month via SIP route to achieve rupee cost averaging. You can use this SIP Calculator to plan for your investment.    

Who should invest in Equity Mutual Fund?

Equity mutual funds are ideal for those investors who are keeping long term investment horizon and are able to manage reasonable risk. Investors who are looking for potentially higher long term returns mostly invest in equity mutual funds.   

A person who has kept his or her fund inactive in saving account should churn the returns by investing in equity mutual funds. It is advisable for recently graduated students who have joined a company or a person who is looking for aggressive retirement plans to invest in equity mutual funds so that they can avoid the cost of delay.

The most important thing to consider before investing in equity mutual fund is that not all schemes are similar as well as suitable for all investors. Before making any investment decision, an investor needs to check whether his or her financial goals are well aligned with the objectives and returns of mutual funds. Equity mutual funds are mostly compatible with the investors who are:

1) New to mutual fund investment arena and have less knowledge about equity market and its working.
2) Looking for tax saving schemes but at the same time also seeking higher returns.
3) Considering long term investment horizons (more than 3 to 5 years of mutual fund investments)  

What are the advantages of investing in Equity Mutual Funds?

Equity mutual funds offer various benefits as compared to other mutual fund schemes. Following are some of the best advantages of equity mutual fund schemes:

Higher Returns in equity mutual funds: 

Equity mutual funds offer higher returns as compared to debt fund schemes. If you check the past performances of equity mutual funds, they have not only delivered higher returns but they have surpassed inflation rate as well.   

Liquidity in equity mutual funds: 

Equity Mutual funds also provide good liquidity making it more convenient than other mutual fund schemes. May be it is not as simple as withdrawing or transferring some amount from your saving account with a single click but the liquidity provided by equity mutual funds is definitely higher than majority of other investment plans. The investors can get the money in their accounts within a week of redemption.  

Protection against inflation in equity mutual funds:

If you check the past performances of any equity mutual fund, you can see that equity mutual funds have delivered inflation beating returns. As far as inflation rate is concerned equity mutual finds always perform well than any other traditional investment instruments such as fixed deposits, recurring deposits etc.  If you consider inflation rate, these traditional investment options add little or no value to your investments.

Portfolio Diversification in equity mutual funds: 

Whenever an investor invests in equity mutual funds, he or she is holding equities in multiple companies across various sectors, regions, industries and business processes to minimize the risk intensity. This is call portfolio diversification. Diversification protects your portfolio from market fluctuation by balancing the prices between depreciated stocks and well performing stocks during bearing market.

Some equity mutual funds specifically invest in large cap stocks of top 100 companies which have proven sustainable business model. These companies demonstrate consistent performance and remain unaffected by market fluctuations.

Income from Dividends:  

Equity Mutual funds also offer a benefit to gain additional income that can be earned in the form of dividends

Tax benefits: 

Tax Saving is one of the major reasons for investors to invest in mutual funds. Equity Mutual Funds or specifically Equity Linked Savings Schemes (ELSS) offer tax savings upto Rs.1,50,000 per year under Section 80(C) of the Income Tax Act, 1961. ELSS is the only equity mutual fund scheme that has delivered higher returns under tax saving schemes.   

Professional Management: 

Majority of equity fund schemes are managed and monitored by professional fund managers and experienced financial analysts. The extensive knowledge and years of experience of fund managers give mutual funds an upper hand in investment decisions as compared to individual investors. An investor who has less technical or fundamental knowledge of market could end up as a big disaster on stock market.

On the other hand, if you invest in equity mutual funds, your money will be managed by professional fund managers who are masters of their respective industries, sectors or domains as well as true experts in taking investment decision. They can read complicated reports, analyze & interpret complex financial data and make investment allocations accordingly which an individual investor cannot accomplish.

How to choose the best Equity Mutual Fund?

Many investors search for terms like best equity mutual funds, top equity mutual funds, list of top 10 mutual funds, best mutual funds for sip, top 10 mutual funds to invest on Google search and make investment decision on the search results. Instead, it is advisable to check the below parameters before making any investment decision in best mutual funds to invest. You need also need to check the most common myths about mutual fund investments before making any investment decision. 

What are your financial objectives while investing in best Equity Mutual Funds?

Whenever you are planning to invest in any financial instrument, it is very important to work on your financial goals for which you are making investment decision. Once you finalize your goals, you can create a list of best mutual funds to invest in India and then shortlist the top mutual funds based on your financial objectives. It is also important to know most common mutual fund terms before investing so that you have clear idea about the investment options. 

Have you checked the past performance of Equity Mutual Funds?

There are many platforms where you can check the past performances of equity mutual funds. You can click here to check the historical returns of a specific fund. You can also check parameters like CRISIL Rank of a fund performance or you can check 5-years or 10-years returns, Latest NAV, fund factsheet, fund comparison to make investment decision.   

Have your checked the risk associated with Equity Mutual Funds?

You might have read this line “mutual funds are subject to market risk” many times on TV commercials, newspaper ads etc. It is very important to evaluate your risk appetite before investing in equity mutual funds.

A thorough research and discussion with your mutual fund distributor is important before making any mutual fund investment decision. Although equity mutual funds are riskier than debt schemes, it offers higher returns as compared to other mutual fund schemes.

What is the Lock-in Period for Mutual Funds? 

It is important to confirm the lock-in period before investing in mutual fund schemes. It is advisable to not to invest in equity mutual funds if you have short term investment focus. Most equity mutual fund schemes have lock-in period of three years to get tax benefits. 

Which is the Asset Management Company (AMC) or Fund Manager managing mutual fund? 

As majority of AMCs and fund managers are experienced and masters in their fields, it is worthwhile to take a look at which AMC and Fund Manager is going to take care of your hard earned money. It is important to know your fund managers as they are the ones who are going to allocate your money and plan your investment.

What are the Costs Involved while investing in Mutual Funds? 

Majority of AMCs charge some amount in terms of expense ratios, exit load, redemption fees, trading fees etc as it costs money to operate a mutual fund. An investor should carefully check these fees before investing in mutual funds.   

Why Chitale CFS Pvt Ltd?

Chitale CFS Pvt Ltd offers wide variety of investment avenues for short as well as long term investment needs. With more than 30+ years of experience, we are one stop solution for a number of financial products like Mutual Funds, Insurance, Bonds, Fixed Deposits etc. We serve our clients with highest standard of transparency and integrity by putting investor’s interest first.

You can contact us by calling on +91 8999116127 or email us at [email protected]  or   [email protected]

Mutual fund investments are subject to market risks. Please read the offer document carefully before investing

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Mutual fund investment is subject to market risk, read scheme related document carefully before investing.