Top 10 Equity oriented Mutual Funds

Investment in Mutual Funds is a must especially in today’s scenario when Share Market is growing at a good pace. Investing in Mutual Fund is a good option for an investor, who has little knowledge of the Stock market or shares and is willing to take a calculated risk. For a good return and for safeguarding your interest, it is very important that you invest in a mutual fund that is reliable.

Here is all about Equity oriented Mutual Funds and Top 10 Equity oriented Mutual Funds, you should know about.

What is an equity mutual fund?

An equity mutual fund’s portfolio must contain at least 65 percent equities and equity-linked securities. Depending on the investment mandate, these funds can be managed actively or passively. Over a medium to long time horizon, the best equities mutual funds provide outstanding returns.

Equity funds are regarded significantly riskier than debt and hybrid funds because they invest primarily in stocks. Investing using a systematic investment plan (SIP) can assist investors to avoid market volatility to a large extent. These funds are a great way to invest to meet long-term financial goals.

Who Should Invest in Equity Mutual Funds?

When investing in equities funds, you should think about your risk tolerance and time horizon. These funds are appropriate for investors with a five-year or longer investment horizon. As a result, short-term investors should avoid mutual funds that invest in stocks. If you want to save money on taxes, you can invest in ELSS, which is the greatest alternative under Section 80C of the Income Tax Act of 1961.

Three years is the shortest lock-in period for ELSS. Furthermore, it provides a substantially larger return than comparable Section 80C investments. Large-cap equity funds, which invest in equity shares of well-established companies with a track record of providing consistent long-term returns, are a good choice for a new mutual fund investor. To balance the risk-reward ratio, an experienced investor could choose to invest in diverse equities funds.

How does an equity mutual fund work?

• Equity funds primarily invest in the stock (equity) of various companies. As a result, an investor who invests in an equity fund becomes a part-owner of the company in which the fund has invested.
• The stock in which an Equity Fund will invest is determined by two factors. The first is the fund’s category. By regulation, equity funds are classified depending on their investment style or investing universe, and they must adhere to the criteria set forth by SEBI for that category. Large Cap Funds, for example, must invest at least 80% of their assets in India’s top 100 companies by market capitalization (these companies are called large-cap companies).
• The investing universe of an Equity Fund is defined once the fund category is defined. The Fund must now choose which stocks to invest in from this universe. This is where the Fund Manager’s and his team’s role is crucial. These are experts in the fields of markets and finance. They look into and assess a variety of technical and fundamental factors, including a company’s profitability, its ability to weather economic downturns, the industry in which it operates, and so on. They make investment decisions based on this research, such as which stocks to buy, at what price to buy and sell, how many to buy, and so on.
• In addition, after purchasing these stocks, the fund manager monitors how the firms perform, as well as the sectors in which they operate, the economy, and a variety of other important aspects that can influence the stock prices. They remove companies from their portfolio if they believe some of the companies whose shares they purchased will not perform as planned. Similarly, if they discover some businesses that have a lot of potentials, they invest in them early on. Because these fund managers are constantly monitoring the financial markets and the economy, they have the benefit of being able to make such tactical decisions and get the most out of equities markets while coping with volatility.

Top 10 Equity Mutual Funds

Taxation Scenario

• Taxes are levied on dividends and capital gains made by Equity Funds. The difference between the price at which mutual fund units are purchased and the price at which they are redeemed or sold is known as capital gains.
• If you choose the Equity Fund’s Dividend Plan, you will get dividends. When there is extra corpus available to give to investors, the Equity Fund declares a dividend under this strategy.
• Dividends are added to an investor’s income and taxed according to his tax bracket. As a result, if the investor falls into the 20% tax bracket, the dividend he receives will be taxed at 20%. In the same way, if the investor is in the 30% tax band, the dividends received will be taxed at 30%.
• The taxation of Capital Gains is determined by the length of time an investor keeps a mutual fund’s units. If the holding term is less than 12 months, the gains will be subject to a 15% Short-Term Capital Gains (STCG) tax. For example, if the investor’s Short-Term Capital Gain is $1 lakh, the STCG tax will be $15,000.
• If the gains are held for more than 12 months, long-term capital gains (LTCG) tax will be applied at a rate of 10% on gains over $1 lakh. For example, if the LTCG is 1.5 lakh, the taxable amount is 50,000, and you must pay an LTCG tax of 5,000 (10 percent of 50,000). However, if the LTCG is less than $90,000, the taxable amount is nil.