Why Are Equity Funds a Good Long-Term Investment?

Why are equity funds a good long term investment 1 Why Are Equity Funds a Good Long Term Investment?If you have some life goals that will require you to achieve financial stability, you may need to get a hold of financial planning. Financial planning is something that everyone should think about. A plethora of investment products are available in the market. Those who are new to investing in stock market may find it difficult to sort through the various investment schemes and choose one. However, if you have a clear set of short and long-term objectives, making an informed investment decision may be possible.

If you know what your financial goals are, you’ll have a better idea of how much money you’ll need to invest at regular intervals to get closer to them. However, knowing your financial goals may not be enough; investors may need to understand their risk tolerance before making the actual investment. A risk appetite is an investor’s willingness to put their money at risk with a particular investment scheme in order to gain capital appreciation. An individual’s risk tolerance varies depending on factors such as age, income, existing liabilities, and so on. Those with a low risk tolerance usually opt for low fixed interest offering investment schemes.

What exactly are mutual funds?

Many people are thinking about investing in mutual funds because of the capital appreciation they have provided in the past. Fund houses collect money from investors who share a common investment goal and invest it in various money market instruments such as stocks, debt, corporate bonds, treasury bills, government securities, and so on. Units are the shares that mutual fund investors receive in exchange for their shares. Investors are assigned units in proportion to their investment amount and the fund’s current NAV. The performance of a mutual fund may be affected by the performance of its underlying assets.

What exactly are equity mutual funds?

Mutual funds are further classified based on specific characteristics such as fund size, asset allocation, investment strategy/objective, risk profile, and so on. Equity mutual funds are funds that invest primarily in equity and equity-related instruments. An equity fund will typically invest 65 to 80 percent of its total assets in equity and equity-related instruments.

univ mutualfunds Why Are Equity Funds a Good Long Term Investment?

Why are long-term equity funds beneficial?

As the name implies, equity funds invest the majority of their assets in stocks and other equity-related instruments. In the long run, equity-oriented schemes tend to produce the desired results only when one remains invested in them. As a result, anyone with a long investment horizon should consider investing in equity funds. If you have long-term objectives, such as retirement planning or securing your child’s future, you should consider investing in equity funds. 

If you want to see your investments grow, you may need to be patient. Particularly when investing in equity funds, these funds require time to mature. Also, if you invest for the long term, you may be able to outperform inflation. Investing for the long term has its own set of benefits. You may benefit from the power of compounding if you start a SIP in equity funds and keep a long-term investment horizon. Compounding has the ability to turn small investments into large corpuses.

As a result, if you truly want to see your investments grow, you may need to continue investing systematically over time. If you redeem your capital gains from equity funds within 12 months, you will pay no tax on gains up to Rs. 1 lakh. This could be another reason to consider investing in equity funds in the long run. Investing in equity funds through SIPs over time allows investors to benefit from rupee cost averaging. When the fund’s NAV falls, investors are given more units. If, on the other hand, the NAV of the equity fund rises, investors are allotted with fewer units.

Conclusion:

Equity funds may help an investor build a decent corpus in the long run, but before investing in them, investors should first understand them. This is due to the fact that investments in equity funds are subject to market volatility, and there is a chance that your portfolio will suffer losses. Furthermore, the returns on equity fund investments are never guaranteed. So, if you want to invest in equity funds but aren’t sure which one to choose, you can do some research and consider investing in an equity fund that has been a consistent performer. If you believe you require additional assistance, it is best to seek the advice of a financial advisor like Tradeplus, whose job is not limited to sharing our expertise with investors but also with empowering with other tools and services to deal with Mutual funds.

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