Equity funds are one of the top investment options for investors looking to grow their wealth and generate high returns. In fact, around 48% of the equity mutual funds have outperformed their set benchmarks in September 2024. The AUM of equity mutual funds jumped by 3.10% from August to September 2024.
This is one of the primary reasons equity funds are considered to drive growth. But there is more to it. So, let us explore what makes equity mutual funds best for investing.
5 Reasons Why Equity Funds Are Your Secret Weapon for Investment
Investing in the best equity mutual funds can offer you attractive returns. It can help you generate considerable wealth while earning good returns. Here are some of the reasons that make equity funds a secret weapon for investors:
1. Diversification Reduces Risk
Equity funds allow for diversification. It invests across various sectors and companies. This helps mitigate the risks associated with market volatility and economic downturns in any single sector or region.
By pooling your investments in a mix of assets, equity funds offer a safer route to potentially higher returns.
2. Professional Management
The equity mutual funds are managed by professional fund managers. They have years of expertise and a great market understanding. They use their market knowledge and investment acumen to make informed decisions.
They aim to outperform the market and deliver substantial returns. Their strategic insights and timely adjustments ensure that your investments are well-managed and aligned with the latest market trends.
3. Potential for Higher Returns
Over the long term, equity funds have historically offered higher returns than traditional investment options like bonds or fixed deposits. By investing in various stocks, equity funds capture the growth potential of these assets.
This often results in a substantial appreciation in value, providing investors with potential financial outcomes.
4. Liquidity
Equity funds are highly liquid in nature as compared to others. Investors can buy or sell these funds anytime unless there is a lock-in period. A high level of liquidity is beneficial for those who are looking to generate wealth while tackling market circumstances.
This flexibility allows you to secure funds at times of need. Additionally, due to this, you can change your investing plans to match your financial goals.
5. Tax Efficiency
Investing in equity funds can also offer tax advantages. Long-term investments in equity funds are taxed at a lower rate of 12.50%, which can significantly enhance the effective returns.
This makes it a suitable choice for those who are looking to grow their wealth while paying off a reasonable amount of taxes.
Top Equity Mutual Funds to Invest In India
When you are investing in equity mutual funds, there are a few options that stand out. This is mainly due to the returns they offer. However, if you consider the past 1-year performance, over 44 equity mutual funds have offered a return of more than 50%.
Of these, the top-performing ones are as follows:
- HDFC Defence Fund: This fund has emerged as a leader with a remarkable return of 73.72%. Its focus on the defense sector, which has seen significant growth, contributes to its strong performance.
- LIC Infra Fund: This fund has achieved a return of 65.61%. The infrastructural development and government focus on this sector likely fuelled its high returns.
- Bandhan Small Cap Fund: With a return of 64.26%, this fund targets small-cap stocks, known for their high growth potential. This ensured better returns while tackling the risk.
Conclusion
Investing in equity mutual funds offers the dual benefit of growth and wealth creation. Known for their diversification and growth strategies, these funds have been a top choice for investors for years.
With features that allow easy tracking and management of investments, a SIP mutual funds app can be your smart partner in tracking the power of equity funds for long-term financial growth. But while you invest, make sure to compare and contrast all your options to make a wise investment decision.
