Investing in well-crafted equity mutual funds solves the biggest hurdle of equity investment- stock selection. Professionally tailored portfolios have the potential to create long-term wealth and, at the same time, reduce risk.
Managed by experts: Equity funds are actively managed by professionals who study the stock market and screen stocks that can deliver benchmark-beating returns to investors in exchange for a small fee.
Diversification: Investors benefit from diversification across sectors, categories, and market capitalisation as mutual funds invest in a diverse portfolio.
Choice: Investors can choose from a variety of equity mutual funds, such as large-cap funds, mid-cap funds, small-cap funds, index funds, and sectoral funds, based on their investment objective, risk profile, and investment horizon.
Systematic investing: Investors can use the SIP route to minimise the risk of market volatility and benefit from rupee cost averaging.
Tax treatment: Long-term capital gains from equity funds up to Rs. 100,000 in a year are exempt from tax. Profits over Rs. 100,000 are taxed at a flat rate of 10%. This makes it a tax-friendly investment for those in the higher income brackets. Equity-Linked Savings Scheme (ELSS) offers tax benefits under Section 80C of the income tax act.
JM Financial Services Limited offers you an extensive selection of schemes across mutual fund houses. Our user-friendly platform makes transacting a breeze, whether a lumpsum investment or an SIP. Our interactive screeners will help you identify funds based on your needs and objectives.
FACTBOX
Equity funds are mutual funds that primarily invest their corpus in the equity markets (more than 65% of their corpus are invested in stocks). Equity mutual fund schemes are focused on long-term capital growth. They are suitable for investors with a higher risk appetite and a longer-term horizon.
Equity funds invest a majority of their assets in stocks and shares of companies listed on the stock exchanges. These funds are managed by professional fund managers who take decisions on the composition of the underlying portfolio (which stocks to invest in, when to invest in them, when to exit them etc. with the aim of earning better returns for investors in the fund.
Investors can buy units of these equity funds either by paying a lump sum or through systematic investment planning. If the underlying portfolio performs well, investors will earn better returns.
If you have a long-term perspective and are willing to wait out short term volatility, equity funds can give better returns than other asset classes. It is a good investment option for those who have a higher risk appetite. One way to reduce your risk while investing in equity funds is by investing through SIP.
Yes, returns from equity mutual funds schemes are taxable.
Short-term capital gains: If you sell your mutual funds within one year of buying, you are liable to pay short term capital gains on your profits at the rate of 15% plus cess.
Long term capital gains: If you sell your mutual fund units after one year, you are liable to pay long-term capital gains. LTCG up to Rs 1 lakh per year is exempt from tax. Profits above Rs 1 lakh are taxed at 10% plus cess.
Over the long-term, equity as an asset class tends to outperform other asset classes. Equity mutual funds are a great way to get an exposure to this asset class.
Benefits of investing in a equity mutual fund include:
- Professional management: Equity funds are managed by expert fund managers who are supported by research teams. You don’t have to worry about researching and picking the right stock at the right time.
- Liquidity: Equity mutual funds are highly liquid. You can sell your units and get the money in your account within 3-5 business days.
- Convenient: You can buy mutual fund units in a just a few clicks either in a lump sum or through the SIP route.
- Returns: Good equity mutual funds provide higher returns than most other investment options.
- Diversification: When you invest in an equity fund, you are essentially investing in a basket of stocks picked by experts.
- Tax efficient: If you plan to hold your equity funds for longer than three years, your returns up to Rs 1 lakh a year are tax free. Even above Rs 1 lakh, the LTCG is 10%.
- Choice: Equity mutual funds offer you a wide range of options in terms of sectors, market capitalisation, themes etc.
