Long term equity funds and their potential for wealth creation

Are you looking to invest in a long term equity fund in India? When it comes to deploying investments in long term equity in India, you can consider several avenues for handsome wealth creation and stellar future returns alike. There is soaring demand for long term equity mutual funds in India which invest a major chunk of their inherent assets into equity and equity based financial instruments. The investment goal of an equity based mutual fund will be the generation of sizable appreciation of capital over the long haul.

Hence, planning for financial growth in the long term and getting returns that are inflation adjusted necessitate opting for long term equity mutual funds in India as a suitable choice. Choosing prudently is vital in this regard since there are a large variety of choices at your fingertips as well. There are multiple options available if you are looking for a suitable long term equity fund in India. These include large cap, midcap, small cap, multi cap and dividend yield funds along with contra/value funds, sectoral or thematic funds, focused funds and ELSS or equity linked savings scheme.

Some pointers worth keeping in mind

It goes without saying that investing in long term equity in India is riskier in terms of being vulnerable towards market fluctuations, shifts and other volatility which may impact returns. However, remaining invested for the long haul may lead to stellar returns that easily beat inflation and are superior to returns generated by most other types of financial/market instruments. Here are some pointers worth keeping in mind at your end:

• Large cap funds invest 80% in equity and equity based instruments. They offer more stability and growth with exposure to bigger and blue-chip entities. Pure large cap funds may help in combating the downward risks better as compared to pure counterparts in the mid cap space. You should have an investment horizon of roughly 5 years or more.
• Mid cap funds invest around 65% of overall assets in mid-cap stocks, i.e. companies which are placed between positions 101 and 250 on the basis of full market capitalization levels. Mid cap funds enable generation of good returns although the risks may sometimes be magnified as well. They surpass pure large cap counterparts in bullish markets while in bearish markets, they have tendencies of falling more as well. You should have higher risk appetite backed by an investment time-frame of 5-7 years at least.
• Small cap funds invest 65% of total assets in equity and equity linked market instruments of small cap entities. They have lower trading volumes which mean higher risks overall. They can go extremely high or plunge dangerously low depending upon market circumstances. You should have tolerance for extremely higher risks in this case with a 7-10 year time-frame for investment.
• Multi-cap funds invest throughout the entire spectrum of stocks and they have stable allocation levels for both mid cap and large cap stocks. The investment horizon should cover 5 years while you should have ample risk appetite as well.

ELSS helps in getting tax deductions under Section 80C although there is a 3-year lock-in period that you have to abide by. Choose carefully from the above mentioned fund types and here’s to a happier investment journey ahead.