Equity

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Complete Guide on Equity Investments

24 Jun, 2017

The financial market in India has undergone a massive transformation over the years. Initially this market offered only limited and handful ways of investment like Provident Fund (PF), PPF, Fixed Deposit or recurring deposit. Today, however, this has changed. Today if you look around there are sea full of different ways and means in which a common person can invest his hard earned. Of these many different investment options, one particular option which has become a quite popular is equity investment or mutual fund investment. This post provides you an overview on equity investments.

Understanding the Basics of Mutual Funds?

Mutual Funds are a new mode of investment which offers people low investment cost, tax saving option for parking their surplus funds on the promise of giving good returns. This form of investment is extremely useful for those who don’t believe in investing in stocks and shares. One of the greatest advantages of these mutual funds is that they are quite flexible in the sense that you can withdraw from these investments even prior to their maturity date.

Debt or Equity?

Before jumping on which mutual fund to pick, the first thing which you must know, understand and be aware of is the two basic forms of investments, debt and equity. Both debt as well as equity will help you in achieving different financial objectives. Equity investments fetch higher returns as compared to debt investments but are more volatile than debt. These equity investments are suitable if you are looking for investing for at least 5 years or more.

As compared to equity, debt mutual funds operate on platonic grounds, that means they offer steady returns even though not as much as equity funds. So in short, they are a comparatively less risky, low returns yielding option which are perfect for short term goals.

Choose wisely

Today’s equity market presents the investors with limitless options of different mutual funds. Hence, an investor has to be alert, prudent and should know what his or her financial plans and priorities are. Choose one out of the many available options can be quite a daunting process. Hence, get hold of a fund manager who will not just understand your financial plans but will also suggest you with appropriate investment options.

Direct or Regular?

Once you cross the hurdle of choosing whether to opt for debt or equity, the next decision which you have to make is to choose from a direct plan or a regular plan. Although both direct and regular are not entirely different from each other, nevertheless, a direct plan charges you slightly lower than an annual plan. Under a direct plan, you yourself go about executing this investment plan sans any fund manager. Although a good way to invest all by yourself, nevertheless, if you are a first timer, then it is always better to consult a fund manager for guidance.

Dividend or Growth?

After direct or regular, comesanother question of returns, whether dividend or growth. If you are not very inclined on getting dividends, then straight away go for growth option. This will help in multiplying your money with the help of compounding process. So at the end of your term, you will get handsome returns.

 

Thus, these are some of the basic features of equity investments which every investor must know. However, every investor must read the offer document carefully before investing.

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