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All about Equity Funds

Equity funds invest primarily in equity shares of listed companies across different sectors and market capitalization segments. Equity funds are considered as one of the long term investment products and ideal if you are planning to invest for the long term in order to achieve your financial goals like, retirement, higher education of your children or wealth creation. Let us see the benefits of investing in equity funds.



• Equity is one of the best performing asset class in the long term: Historical data shows that, equity is the best performing asset class if your investment horizon is long. In the last 20 years, the BSE Sensex has given 11.94%, while gold has given 10.32% and bank fixed deposits have given 7.01% annualized returns respectively. (Source: BSE India, World Gold Council and leading bank FD rates, for period ending 23/1/2018)



Rs 1 lakh invested in the Sensex 20 years back would have grown to Rs 9.62 lakhs, while the same amount invested in gold and fixed deposit would have grown to Rs 7.10 lakhs and Rs 3.89 lakhs respectively. (Source: BSE India, World Gold Council and leading bank FD rates, for period ending 23/1/2018)



• Diversification of risk: By investing in an equity fund which has a diversified portfolio of stocks across different sectors, you are able to diversify company specific risks and sector risks to a greater extent. Whereas when you invest directly in stocks, you are exposed to company and sector risk along with the market risk as well. Also, significant investment is required to build a diversified portfolio of stocks if you are investing directly. As mutual funds work on the concept of pooling of money from many investors, you can aim to achieve risk diversification even with a small investment.



• Professional fund management: Equity funds are helmed by fund manager(s) supported by a team of analysts. The track record of the scheme managed by the fund manager is available in the public domain. As investor, you can leverage the experience and expertise of the fund management team to get better returns on your investments. As stock selection is a complex task which requires careful analysis of different factors like capital structure, financial performance, financial risks, competition, industry growth factors etc. Asset Management Companies employ team of research analysts and the fund manager/s who have the necessary experience and expertise to analyse these complex factors.



• Systematic Investing helps create big corpus: You can invest in Equity funds through systematic investment plans (SIP) which offers a convenient mechanism of saving small amounts every month on a specific day. The money is automatically debited from your bank account every month on the specified date chosen by you and invested in a mutual scheme of your choice. Over a period of time one can accumulate a fairly large corpus.



Tax Advantage: Finance Bill, 2018 introduced long term capital gain tax on long term equity oriented fund (Investments held for more than 12 months) at concessional rate of 10% on over and above of long term capital gain Rs. 1,00,000 w.e.f. 01.04.2018.



The long term capital gains will be computed without giving effect to the first and second provisos to section 48, i.e. inflation indexation in respect of cost of acquisitions and cost of improvement, if any, and the benefit of computation of capital gains in foreign currency in the case of a non-resident, will not be allowed.



ii) The cost of acquisitions in respect of the long term capital asset acquired by the assesse before the 1st day of February, 2018, shall be deemed to be the higher of –



a) The actual cost of acquisition of such asset; and



b) The lower of –



(I) the fair market value of such asset; and



(II) The full value of consideration received or accruing as a result of the transfer of the capital asset.



Fair market value has been defined to mean –



a) In a case where the capital asset is listed on any recognized stock exchange, the highest price of the capital asset quoted on such exchange on the 31st day of January, 2018. However, where there is no trading in such asset on such exchange on the 31st day of January, 2018 , the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value; and



b) In a case where the capital asset is a unit and is not listed on recognized stock exchange, the net asset value of such asset as on the 31st day of January, 2018.



• Short term (investments held for less than 12 months) capital gains are taxed at 15%.



• Finance Bill, 2018 introduced dividend distribution tax @10%(Grossed up basis) plus surcharge and education cess as applicable on dividend distribution by EOF w.e.f. 01.04.2018 and such dividends are exempted in the hands of investor



It should be noted that the analysis, opinions, views expressed in the document pertaining to taxation are based on the Budget proposals presented by the Honourable Finance Minister in the Parliament on February 1, 2018 and the said Budget proposals may change or may be different at the time the Budget is passed by the Parliament and notified by the Government. For a detailed study, please refer to the budget documents available on http://www.indiabudget.gov.in



"ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF RMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."



AN INVESTOR EDUCATION INITIATIVE BY NIPPON INDIA​​ MUTUAL FUND.





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Disclaimer:
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document. Language Disclaimer:
While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article. "ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF NIMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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