There are numerous benefits of investing in equity mutual funds. These include:
Long term Wealth Creation
Equity funds have the potential to present a promising opportunity to outpace inflation and accumulate significant wealth over the long term. Historical data demonstrates that equity has consistently been the top-performing asset class. For instance, over the past 20 years, Nifty 50 TRI has delivered an annualized return of 13.25%*. Source: NSE India, Data as on 27 June 2023.
Portfolio diversification
Equity mutual funds offer portfolio diversification by investing in a range of stocks from various industry sectors. By spreading investments, these funds aim to minimize the risks associated with specific stocks or sectors. As a result, even if some stocks in the portfolio underperform, you can still benefit from the capital gains generated by the performance of other stocks in the fund’s investments. This diversification strategy helps mitigate risks and enhances the potential for overall returns.
Easy on pocket
You can do investment in equity funds through the Systematic Investment Plan (SIP) approach. It enables you to make regular investments on a weekly, bi-weekly, monthly, or quarterly basis, with amounts as low as Rs. 500. Besides, SIP in equity mutual funds helps to mitigate the impact of market volatility through rupee-cost averaging.
Professional fund management
Equity mutual funds are managed by professionally experienced fund managers who have expertise in investing in stock markets. They carefully examine the market, assess the performance of different companies, and strategically invest in high-performing stocks that have the potential to generate optimal equity mutual funds returns for investors. You can rely on these seasoned fund managers to effectively manage your investments.
Tax benefit
For any investments redeemed on or after April 1, 2025
Short Term Capital Gains will be taxed for units/investments held upto 12 months at 20% (plus applicable surcharge and health & education cess) for resident individual.
Long Term Capital Gains will be taxed on units/investments held for more than 12 months at the rate of 12.5% (plus applicable surcharge and health & education cess). Capital Gains exceeding 1.25 lakhs (one lakh twenty-five thousand rupees) is subject to the aforementioned taxation. Any indexation benefit is not applicable to this category.
Income Distribution (IDCW) will be taxed in the hands of investors. Section 194K is introduced to deduct tax on IDCW. TDS of 10% is applicable on resident individual & 20% on non-resident individuals (plus any applicable surcharge and cess). TDS is not deductible if cumulative IDCW income in respect of units of a mutual fund is below Rs. 10,000/- in a financial year.