Investing in equity mutual funds in India can be a smart move, provided you have the requisite risk appetite for the same. In fact, it can be a good way to revive your savings amid the COVID-19 crisis.
Thinking of investing in equity mutual funds in India? The timing couldn’t have been better, considering the impact of the coronavirus crisis on the markets and mainstream economy at large. As India shrugs off its nationwide lockdown and starts returning to normalcy in the Unlock phase, choosing equity mutual fund schemes can be a good way to revitalize your savings which may have been affected by the situation over the last few months. Owing to financial constraints, salary cuts, and business losses, many individuals have naturally dipped into their investments in the aftermath of the COVID-19 outbreak in a bid to keep things running smoothly.
Naturally, with the steady recovery of the economy, you should be putting some thought into restoring your savings and future investments in the current scenario. In this context, equity fund investments could actually be a good bet. This is the best time to invest in these funds and commence SIPs (systematic investment plans) once again with an eye on meeting long-term goals in spite of the temporary blip.
Importance of investing in equity mutual funds in India
Along with the fact that equity mutual funds returns are considerably higher than debt-based funds, there are several advantages of investing in the best equity funds as well. Some of them include the following:
- Professional Management– AMCs (asset management companies) work in highly professional ways through research and analysis prior to deploying investments and trading in the market. Equity mutual funds offer a major benefit for customers, i.e. professional management by skilled fund managers with a view towards earning superlative future returns.
- Spreading out of risks– Since equity mutual funds are mostly long-term investments, you will benefit from spreading out your risks over the long haul, i.e. short term fluctuations will not hinder the overall maturity amount if you remain invested for a longer duration. SIPs will also help you get rupee cost averaging benefits.
- Compounding– The power of compounding is what really rewards you when you invest in equity mutual funds in India for the long haul. The earlier you start now, the higher you will earn after the passage of several years.
- Diversification– Mitigation of risks automatically means that several equity funds are spread throughout multiple sectors and stocks, i.e. without being over-exposed to any particular business sector or stock. This helps in absorbing sudden shocks and fluctuations in the market.
- Smaller Entry– You can start your equity mutual fund investment journey with as little as Rs. 500 every month through SIPs. You can always scale up depending upon your financial position and risk appetite.
- Higher Convenience– Equity fund investments give you greater convenience, i.e. you can invest in a fund of your choice and let time and the fund manager do the rest. You do not have to worry about buying multiple stocks, tracking, analyzing, and so on. The risks are also lower in this scenario.
- Taxation Advantages– You can save tax on equity mutual fund investments if you opt for ELSS (equity-linked savings scheme) which offers deductions up to Rs. 1.5 lakh under Section 80C. In any case, equity funds are highly tax-efficient. Based on present regulations, if someone buys or sells stocks individually, long or short term capital gains taxes will apply for every stock separately on the basis of the holding period. AMCs however, do not have to pay capital gains taxes for every time that a fund manager purchases or sells stocks in any mutual fund scheme. The tax will only be paid by the investor on the basis of the duration of the investment.
As a result, equity mutual fund schemes can be smart investments for the revival of your savings and meeting future goals while shaking off temporary disruptions caused due to the coronavirus crisis. The markets are still not performing at their peak and this is the best time to invest as per experts. Start your SIPs, commence investments with full discipline, and when the bull run again commences in the market from 2021 onwards with better market sentiments, do not be tempted to randomly scale up your investment as well.