5 Reasons To Invest In An Equity Fund
GAURAV KANSAL
11:20
Best Investment plans
,
Equity Funds
,
Investment Plan
,
mutual funds
,
Savings plan
,
sip
,
slider
,
Tax Benefits
,
Tax Saving Plans
No comments
5 Reasons To Invest In An Equity Fund
5 Reasons To Invest In An
Equity Fund
Skeptical
about equity funds? It is
actually the most beneficial and opportune way for a retail investor to get an
exposure to stocks. If you are unsure as to how mutual funds are advantageous,
A convenient way to
participate in the India growth story
Benjamin
Graham, also known as the father of value investing, had remarked that making
money depends on the "amount of intelligent effort the investor is willing
and able to bring to bear on his task". He was referring to stock
analysis. According to him, an intelligent investor is an individual who has
the time, energy and capability to conduct his or her own investment research.
category
of intelligent investors. Even if one does possess the skills, capability and
knowledge to manage their own investments, the issue of time is a valid one. In
such a case, it makes logical sense to leave the specific investment decisions
to an asset manager and his team of analysts. Restrict your effort to looking
for a good fund.
Fire proofs savings against
inflation
According
to data released by the Statistics Ministry in New Delhi, the Consumer Price
Index, or CPI, rose 7.31% in June and 8.28% in May. No one has to spell it out
that inflation corrodes your savings. For instance, an investment in fixed
deposits assures you of a definitive return, currently the 1-year return on a
bank fixed deposit is between 8-9%. Take tax and inflation into account, and
your investment would have defeated its purpose.
Equity is
one asset class that manages to outperform inflation over time. And, believe it
or not, it does have a tax break. The tax on long-term capital gains is zero,
which means you pay no tax on the return you earn from your investments if you
hold it for at least a year. In the long run, this amounts to a huge savings.
In fact, stocks and equity-backed investments (equity mutual funds and equity
oriented balanced funds) are the only asset classes which are completely exempt
from tax on long-term gains. So let's say you invested in Franklin India Prima
Fund a decade ago. Your annualised return of 20% not only beats inflation
hollow but you pay no tax on the return. So despite the volatile markets over
the past decade, you would still be a winner.
Huge opportunity
There are
thousands of funds from 40 asset management companies, or AMCs, that are
available to the retail investor. So there is no dearth of options. However, be
wise and pick up funds which have a good track record and a good pedigree.
Within
equity, the choices abound. You can opt for a growth fund or a value fund, or a
fund that combines both investing styles. For periodic payments, take the
dividend option or else, stick with a growth one. There are funds classified on
the basis of sectors - auto, infrastructure,
FMCG, pharma; as well as
market-cap. There are international funds too that offer a global exposure to a
portfolio.
Besides
equity, there are also debt funds and gold funds and hybrid funds that combine asset classes. So one
can diversify their entire portfolio and conduct their asset allocation by
resorting to mutual funds.
No strain on your pocket
By
investing just a tiny amount, you get a ready-made, well-diversified portfolio.
Let's say you start a monthly systematic investment
plan (SIP) in UTI
MNC Fund. By investing Rs 1,000/month, you instantly get a portfolio of around
40 stocks across more than 10 sectors. The selection is made by the fund
manager who will invest after conducting his research on which sector and
individual stocks to invest in. Towards this, the investor will be charged an
expense ratio, which in this case is 2.57% of the assets of the fund. Do note,
the net asset value, or NAV, declared is post deduction of expense.
Once you
put an SIP in place, the amount that you decide to invest will automatically be
deducted from your bank account and invested at the date pre-selected by you.
With no effort on your part, your savings will be channelised into the fund of
your choice.
Liquidity
To redeem
your investments, you will have to fill up a redemption form. If you submit it
before 3pm, the NAV of that working day is applicable. Post that time, the
units will be redeemed at the NAV of the next working day.
Once the
redemption request is successfully received and verified, it takes anywhere
from 2 to 4 working days for the proceeds to be credited to the registered bank
account.
Open-ended
schemes can be redeemed anytime. If you want to sell your units in a
close-ended fund before the tenure of the fund has been completed, you will
have to sell them on the stock exchange, where liquidity is an issue. Some
close-ended funds offer a redemption window periodically.
Subscribe to:
Post Comments
(
Atom
)
No comments :
Post a Comment