Question 1

How do Equity Funds Work?

Accepted Answer

How do Equity Funds Work? Like all mutual fund schemes, equity mutual fund schemes pool fund from investors and invest a large portion of the corpus (at least 65%) in equity shares of the companies across sectors. The asset allocation is done according to the investment mandate of the scheme, meaning, a large-cap scheme will predominantly invest in large-caps, and a thematic equity scheme will invest in equities around a specific theme. Equity mutual fund schemes are known to be riskier than other types of mutual funds for short term horizon, however, has the potential of relatively higher returns over medium to long term. And, this makes it a must-have investment in your portfolio.

Question 2

Why Should You Invest in Equity Fund?

Accepted Answer

Equity Mutual Fund Scheme is an investment vehicle for achieving one’s long-term goals or for wealth creation. The risk and the returns potential vary from scheme to scheme. Here are a few reasons why one must consider investing in equity fund schemes. The primary benefit of investing in equity fund is capital appreciation. Potential for delivering inflation-adjusted returns and accumulate a significant corpus in the long- term. Equity mutual fund schemes are typically invested in portfolio of 40-50 stocks spread across different sectors, thus mitigates the riskiness of the investments relatively. Investment in equity mutual fund scheme may be one of the best choices to achieve long-term financial goals. Professional fund managers manage the investments, thereby save one’s time and help manage the challenges of stock selection, allocation to sectors, monitoring, and management.

Question 3

SIP (Systematic Investment Plan) or Lump Sum in Equity Mutual Fund Schemes?

Accepted Answer

Investments in Equity Mutual Fund Schemes may be made in two ways – lump sum investment or through SIP (Systematic Investment Plan). In lump sum route, one may invest through a single payment, whereas, under the SIP mode, one may invest periodically (monthly, quarterly, half-yearly or annually etc.) based on the scheme one chooses to invest. SIP is a process for a disciplined investment of a certain on a pre-decided date in a specific mutual fund scheme, regularly over a period of time. * Disclaimer - Past performance is not a guarantee of future returns and may or may not be sustained in the future.

Question 4

How to Invest in Equity Funds?

Accepted Answer

The process of investing in equity funds is the same as that for investing in any other mutual fund category. One can invest in equity funds through the website/ mobile application of the mutual fund house or physically submit the application form at Official Points of Acceptance (POA).

Question 5

What are the types of Equity Funds?

Accepted Answer

Large Cap Fund – Such funds invest at least 80% of its net assets in the equity shares of large cap companies. Large & Mid Cap Fund - Such funds invest at least 35% of their net assets in the equity shares of large cap and mid cap companies each. Mid Cap Fund - Such funds invest at least 65% of its net assets in the equity shares of mid cap companies. Small Cap Fund - Such funds invest at least 65% of its net assets in the equity shares of small cap companies. Multi Cap Fund – Such funds can invest across equity shares of large cap, mid cap and small cap companies with at least 25% each in each of market cap segments. Flexi Cap Fund – Such funds can invest across equity shares of large cap, mid cap and small cap companies without any particular bias towards any market cap segment. Dividend Yield Fund – Such funds invest predominantly in dividend yielding stocks with minimum 65% investment in equities. Value Fund – Such funds adopt value investing strategy with minimum 65% investment in equities. Contra Fund - Such funds adopt contrarian investing strategy with minimum 65% investment in equities. Focused Fund - Such funds adopt focused investing strategy with maximum investment in 30 stocks and minimum 65% investment in equities. Sectoral/ Thematic Fund - Such funds aim to capitalize on specific sectors/ themes with minimum 80% investment in equities of a particular sector/ theme. Equity Linked Savings Scheme (ELSS) - Such funds must invest at least 65% in equities and equity related instruments with a 3-year lock-in period and carry tax benefits under Section 80C of the Income Tax Act.

Question 6

Are Equity Mutual Fund Schemes taxable?

Accepted Answer

Both the tax-saving equity mutual fund schemes and the regular equity funds have the same tax implication. If the investment is redeemed before 12 months, the returns earned are treated as short-term capital gains and are taxed at 15%. For investments that are redeemed after 12 months, the returns are considered as long- term capital gains, and it is taxed at 10% if the returns earned is more than Rs. 1 lakh in a financial year. ELSS (Equity Linked Savings Scheme) or tax-saving equity funds is one of the most efficient tax-savings schemes under Section 80C of the IT Act, 1961. It has the shortest lock-in period of three years.

UTI Equity Mutual Funds

Taxation rules of equity mutual funds

Who should invest in equity mutual funds?

Types of Equity Mutual Funds

How Does an Equity Mutual Fund Works?

Why Invest in Equity Funds?

Equity Funds