Monday, October 25, 2021
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13 reasons why you should choose equity mutual funds

Many folks think they aren’t good at earning money, when what they don’t know is how to use it


—Frank A. Clark

If you want to be rich, achieve all your long-term financial goals, then investing in equity mutual funds can be the best opportunity.

When Sachin met me, he was not prepared for any investment beyond FD and PPF. He had varied goals and surely wanted to be a rich person. Moreover, he felt the need to achieve financial freedom in the next ten years. He wanted to invest in a channel where he could accumulate money, where the money could grow positively. He was scared of stories he had heard from people about losing one’s capital. He had two daughters and family that he had to look after. I saw that spark in his eyes which had big ambitions. He was working intelligently and doggedly to earn that money. His dreams required the fuel that could jettison his goals to the sky! Moreover, there was nothing to stop him from becoming a rich and wealthy person.

But how could he achieve his dreams with investing in FD and PPF was a big question. Was he prepared to come out of the attitude of being a conservative person? Could he take risks? Was he prepared for more risk? What were the risks he was ready to take? Could he see the journey for his money ahead? With this, could he anticipate the action that was necessary for him to undertake to achieve financial freedom?

I couldn’t just sit back and make him start into his journey. It required some thought points and some simple know-how. I embarked on this journey to make him aware of the top 13 reasons to invest in equity funds. I made an honest endeavour to make him start on his journey to be a rich person and to help him achieve all his financial goals over a long period.

I did take him through the standard KYC, risk profile test, goals identification process and other procedural guidelines. Here, it is the standard procedure that we make our clients go through before they get started with investing in direct mutual funds.

During this process, Sachin identified clear goals and a basic understanding of his current money utilisation. He further understood that he had to allocate more money for his long-term investments. He should prioritise his investment first and not what was left after allocating his routine monthly expenses.

He realized that he also had to increase his income annually and snowball more money into his investment basket. If he wanted to be rich, he had to understand how his money was going to work for him. Else, he realized, that he would have to continue to work for life and always feel frustrated because he worked diligently. Still, he might end up feeling that he would never become rich. I outlined this clear financial strategy for him to Succeed. He agreed that success had to come to him only if he had a plan. He also agreed that he should have a plan B to rise to his full potential. Simultaneously, he had to start seeing his money working harder for him. Results had to be better than average. Here, he was ready to take risks to dominate his challenges of understanding and making money work for him. Thus he decided to invest in long-term equity mutual funds without worrying about the ups and downs of the market. He was mentally prepared to enjoy the rollercoaster ride in his financial life. He knew that to get more, he had to take more risks. To understand how it works, he was ready to assimilate these 13 points. So here are the 13 points that I made easy for Sachin. And most importantly, if he can, why can’t you? therefore, buckle yourself up to:

Equity market

  1. Just anyone can do: Yes, anyone with a bank account, PAN, Aadhaar can get started with maybe be a minimum amount of just 500 per month. So get started. The amount is not important, but the habit is.
  2. Beat inflation: You have to beat inflation to buy those things which are going to be As inflation in India is still 6-7% (Medical and education are even higher at 10-15%), you need to be able to buy these even after ten years. It would be best if you beat this critical factor which eats away your base capital. So to beat it, you need to step in the world of equity mutual funds.
  3. Have a diversified portfolio: When you invest in the equity market by buying, let’s say, 5-10 shares, you invest at your own You are told to invest by someone who is not an expert perhaps. Therefore, equity mutual funds provide a better way. Here fund managers, who are highly qualified and experienced, can manage your money. They invest in the top 100 stocks in particular industry/industries. They are, therefore, able to bring the risk down by investing in a diversified way.
    3. Have a diversified portfolio
  4. Goal-oriented funds: Some funds are designed to perform in a certain For your long-term goals, equity mutual funds are the best opportunity to invest in your specific goals. These goal-oriented funds can be categorized into large-cap, mid- cap, small-cap, etc. Similarly, the returns shall vary from one category to the other category. More risk leads to more returns.
  5. Tax saving: While investing your money for saving tax, under the Income-tax act 1961, you could save in a particular category of mutual funds called as ELSS (equity-linked saving scheme). These high-risk equity funds are ideal vehicles to invest in the lock-in period of three You can save tax by availing the benefit under section 80C, up to Rupees 1.5 lakh. This category of investment option under 80 C, is an ideal way to save tax. Moreover, they are the least locked-in investment. These are not the normal equity mutual funds. They are categorized and identified as ELSS. Once you invest in these finds, you get a certificate towards the end of the financial year. You can use this certificate for saving tax. So, understand and carefully earmark funds to invest separately in these categories of funds. Of course, these investments should also be aligned to some specific goal, like wealth creation. At the end of the three years lock-in, check their performance. If they have performed well, continue. Else, take out and invest in better performing funds.
  6. Nearly tax-free: After the March 2017 budget, all investments in equity mutual funds attract 10% tax on the capital However, a limit of Rupees one lakh rupees had been exempted per financial year for such capital gain to be taxed. Nevertheless, don’t worry about such taxation. If you get Rupees one lakh rupees in capital gains, it’s a small amount of 10% which is just Rupees ten thousand as the tax. Instead, look at the higher 90% that you have gained post-tax. Don’t let paying tax to be a limiting factor for your success in being a rich person! Professionally managed and highly qualified fund managers are experts who manage your investments in the stock market. When you invest in mutual funds, along with the other investments, the professionals manage this fund through very powerful methods. They not only invest but monitor and keep making the course corrections. They invest ideally in over 50 to 100 stocks. Each category of funds is strategically selected.
  7. Professional Management: Money invested in equity markets is managed professionally by fund managers; most of them regularly beat their fund’s You do not need to review the funds daily as the schemes are managed professionally by fund managers. When an investor is unable to invest in equities due to the lack of financial market knowledge, equity mutual funds are the best option.
  8. Liquidity, redemption: It’s too easy to get the money back! Sachin couldn’t believe that he could take out part or full amount within three working days, back into his bank Mutual Funds are reasonably liquid with the money back in your bank account after three working days of redemption. You can stop your monthly SIP anytime. Of course, there are normally two conditions to keep in mind: Less than one-year redemption attracts short-term capital gains and exit load charges at an average of 1 %. (check latest income tax laws). With these new options, Sachin gained more confidence. After all, ignorance may not always be blissful! If he didn’t know, he didn’t know. Now that he was aware, his confidence also shot up more.
  9. More risk, more returns:
    1. Large-Cap: are funds that invest primarily in large Predominantly, large-cap companies experience a slower growth rate and have a much lower risk than mid- cap companies due to their size. These companies are also called as blue-chip companies.
    2. Mid-Cap: are funds that invest primarily in mid-cap This category of companies normally has a higher growth pattern than the large-cap companies.
    3. Small-Cap: are funds that invest in companies that are relatively new and have lower market This category of funds has the highest risk-return.
    4. Sector Funds are funds that invest in companies in a particular sector like infrastructure, telecom.
    5. Thematic Funds: are funds that invest in line with an investment theme. Like infrastructure theme shall have an investment in all those companies involved in the same category of industry like cement, roads,
    6. Multi-Cap Funds: are the funds that invest all across the above
    7. Index Fund: consists of stocks that mimic an Index, g. Nifty 50 or the Nifty Next 50. They are categorized as Passive Funds, as they are not actively managed by an expert Fund Manager. If you believe that just letting the fund follow the ups and downs of the market is the best (passive) way, then this is suitable for you!
    8. Arbitrage Funds: These funds that use the arbitrage opportunities in a way that the risk is neutralized, furthermore return is The arbitrage is sought by taking advantage of a price differential of the same asset between two or more markets, say, taking advantage of the mispricing between the cash and derivatives market.
      temprery growth is permanent
  10. Beat uptrend and downtrend: Sachin wanted to know as to how he can beat the so-called ups and downs of the He was curious to know about the mechanism. I told him about the rupee cost averaging method. When you invest in a stock which is Rupees 100 today, you will have opportunities to buy it at Rupees 90, 80, 70, and so on when the markets fall. Also, when the markets go up, you can buy them at 110, 120, 130 and so on. Thus, on average, you buy at Rupees 100/-. So overall, the ups and downs are all opportunities to invest.
  11. Low cost: are the funds with lost entry cost and low exit, equity mutual funds are the ideal low-cost way of investing for wealth
  12. Use a bank for standing instructions: how easy it became for Sachin to give standing instructions to his bank to debit a fixed amount every Every month he didn’t have to worry about the next instalment. Just by signing a document to the bank kept honouring this debit instruction.
  13. Long-term capital growth: you can accumulate wealth over a long Equity oriented schemes are funds that invest in shares/stocks/equity and equity-related instruments. The objective of such schemes is to provide capital appreciation over the medium to long-term. These types of schemes are generally meant for investors with a long-term investment horizon and who have high -risk appetite.

Now that you have understood the features of equity mutual fund, let me uncover to you the 3 Ideal Investment Tool to become Rich.

financial advisor in gurgaon

Taressh Bhatia is a CFPCM  cfpCERTIFIED FINANCIAL PLANNER CM and is the founder/partner of Advantage Financial Planner LLP – A firm Registered with SEBI (Securities and Exchange Board of India) as RIA (Registered Investment Advisor).

If you have Liked the blog You can read more in the book – The Richness Principles.
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About ADVANTAGE FINANCIAL PLANNERS LLP: The Firm is registered with Government Of India-The Ministry of Company Affairs as a partnership firm. The firm is registered with SEBI (The Securities and Exchange Board of India) as "Registered Investment Advisors (RIA) under the SEBI (Investment Advisers) Regulations, 2013. Registration with SEBI as "Registered Investment Advisors (RIA) brings more formal approach, risk profiling, disclosure, and transparency. While the firm is a fee-based investment advisor, this brings you the opportunity to get unbiased, researched, accurate, transparent and professional advice. The firm is managed by the founder and its Partner, Taresh Bhatia. The company provides financial planning advisory services from its office in Gurgaon, India. The firm specializes in investment planning, retirement planning, tax planning, personal financial planning and wealth management. About Taresh: Taresh Bhatia is CFPCM CERTIFIED FINANCIAL PLANNERCM. He provides fee-only financial planning advice. He has helped over 300 families plan and organizes their economic life so as to move positively towards their financial goals. Taresh is an expert on financial advice and has three decades of industry experience. Among his qualifications, he is a CFPCM CERTIFIED FINANCIAL PLANNERCM and an MBA from IMI, New Delhi. He is also a member of the Financial Planners' Guild, India (FPGI), an association of Practicing Certified Financial Planners. If you have any questions, please email us at

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