Long-term equity fund investments – A healthier, richer and wiser option?

Long-term equity fund investments

Should you be investing in a long term equity fund in India? The answer of course, is YES from an investment standpoint since equity investments have historically generated the most wealth for investors. However, the risks are immensely higher than any other short or long term investment or conventional fixed income based investments. As a result, you should do your research thoroughly on tax saving mutual funds in India and other ELSS tax saving in India too. ELSS stands for equity linked savings scheme which comes with a 3-year lock-in period and you cannot withdraw your invested amount within this time-frame.

ELSS returns in India have consistently been decent and have also outperformed several other types of investments. These are comparatively safer investments than investments made in several other types of equity plans. Additionally, these funds give you handsome tax benefits under Section 80C as well. Investments up to Rs. 1.5 lakh are eligible for obtaining tax deductions under Section 80C. This is one of the biggest advantages of going for an equity linked savings scheme in India without a doubt.

Why should you invest in equity?

Investing in a long term equity fund in India may actually be a smart move if you are prepared to bear the risks that come along the way. Investing in equity helps you generate sizable wealth for the long haul while comfortably beating inflation at the same time. Returns from equity have been consistently higher than most other mutual fund investments and other safer but low-return and fixed income investments.

There are two investment methods for equity, i.e. you can either choose to directly purchase stocks or simply invest via equity mutual funds. Unless you are a seasoned market expert, you should avoid direct equity investments. Taking the equity mutual fund route is always better when it comes to smoothening out risks in the long haul by staying invested in spite of temporary market fluctuations. Going with equity funds also means that you get access to a diverse range of fund options as well.

Benefits of investing in these funds and other modalities

You may want to consider a Midcap Opportunities Fund which has higher risks but lucrative rewards as well. Do your homework thoroughly before choosing this long term equity fund in India and invest only if you are secure enough financially. This is an ideal investment for those with an investment horizon exceeding four years and is an open ended fund that majorly invests in stocks of mid cap companies. The benchmark index is the Nifty Midcap 100 TR Index while the minimum amount for applying is Rs. 5,000 and in multiples of Re. 1 thereafter. The minimum additional amount is Rs. 1,000 for additional purchase and Re.1 multiples thereafter.

When it comes to exit load, 10% of allotted units may be switched out or redeemed for debt schemes or a corresponding Arbitrage Fund minus any exit load. This can be done within a period of 90 days from the date of unit allotment. Any switch-out or redemption exceeding this limit will have 0.50% as the exit load if they are done within 90 days from the date of allotment of units. Exit load is zero if units are switched-out or redeemed post 90 days from the date of unit allotment. Exit load will also be zero for STP and switches between open-ended equity fund schemes, fund of funds schemes and hybrid schemes.

The fund will majorly deploy capital in midcap stocks based upon its specific objectives of investment and asset allocation. The fund manager will choose equity securities through the stock by stock and top down and bottom up parameters while considering price to earnings ratio, price to sales ratio and price to book ratio alongside margins, asset returns, growth, cash flow and more. Stock selection will be done on the basis of the present financial condition of the entity, potential value creation and more factors. This product will give you benefits if you seek capital appreciation in the long term while also coming with very high risks alongside. However, as they say, no risk, no gain. Do your research, consult financial advisors and venture ahead with your long term equity fund in India.

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About Deepti Verma 311 Articles
Deepti Verma is a Political/Social Writer with an opinion on almost everything! Follow @universal_rover