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.

What are diversified funds in India? Why should you cash in on them?

 

Diversified funds in India are often regarded as quality investment additions to financial portfolios. Should you invest in diversified equity funds in India and other similar types such as multi cap funds? These funds owe their importance to the time tested golden investment principle that states do not put all your eggs in one basket. This equates to the need for not putting your entire investment corpus into a single type of investment. Risks should be spread out and diversified with investments made in several assets and throughout diverse business sectors/industries. Mutual funds enable diversification very naturally through ensuring access to several business sectors and companies alike though these entities may be from one sector. Hence, these funds come with diversified options that spread throughout market capitalizations and business sectors as well. You can consider diversified equity funds in India for investing in accomplishing financial goals for the long term.

Diversified funds in India are those which are often called multi cap funds, i.e. those which invest in various business sectors and market capitalizations. Diversification takes place with several mutual funds being present within the portfolio. This enables reduction of overall risks while helping in cushioning negative impact of performance of some mutual funds/securities within the portfolio as well. The main objective behind diversification is safeguarding returns from the portfolio in the context of extreme market fluctuations and other volatile circumstances. Several mutual fund houses offer diversified funds which may fall in any category. By deploying an investment in a single fund, investors get the advantage of investing in multiple securities which are spread throughout diverse market capitalization levels and business sectors/industries alike. These funds are still impacted by market volatility levels although the impact is lower as compared to funds concentrating on one market capitalization or pure sector funds.

Learning more about diversified mutual funds

These funds will help you mitigate risks better than many other categories such as small cap or mid cap funds. Fund managers of these funds will periodically make the switch between small, mid and large cap stocks on the basis of market conditions. This will make sure that you can cash in on better opportunities present in the market. Returns are suitably amplified from these funds since they deploy investments in companies across varied market capitalizations. Hence, investors can expect sizable growth prospects for the future in spite of the diversified funds not being totally safeguarded from market uncertainty.

Investors also get relatively broader exposure to the market with these funds. Multi cap funds are diversified funds since they invest throughout market capitalizations while saving time for investors greatly. The risks are more balanced when it comes to these kinds of funds. This happens since small cap funds do well in a bullish market while large cap funds work as support in case of a falling market. Those who relatively understand equity markets and their risks and those who have moderate appetite for taking risks, may consider investments in these diversified funds accordingly.

How Does Buying Online Term Insurance Help?

When looking for a life insurance policy with a low premium, you can opt for a term insurance plan. Term insurance plans are the most affordable form of insurance policy with the lowest premium. It provides the highest life cover to a policyholder for a particular time period. 

In India, term insurance plans are offered by almost all insurance companies. 

What does it mean by term insurance plan?

Term insurance plan means a kind of insurance policy applies only for a specific time period or for a fixed term(years). The plan provides financial security to dependant family members in the policyholder's death/critical illness or disability. The term insurance plan offers high returns(amount) at a significantly low premium. 

Why is it essential to invest in term insurance?

In today's environment, the frequency of road accidents and diseases are increasing at a rapid pace. Although we all plan our lives for long, but can never rule out the unfortunate incidents that can play havoc in any person's life. It is, therefore, necessary to financially safeguard the interest of your family. Hence, it is advisable to take a term insurance plan. 

It is an excellent option to subscribe to a term insurance plan at a young age as the premium paid is less. The term insurance plan comes in handy to let your family lead a stress-free life and meet all future financial needs in case of a policy holder's death. 

What does it mean by online term insurance?

Term insurance plans are available on both online and offline platforms. The only difference is that online term plans can be purchased from the comforts of home after analyzing, comparing, and then selecting from various products offered by different insurance companies. Buying online term insurance allows an applicant to:

ü  Review features and other benefits of various term insurance plans

ü  Calculate and then select the premium required to opt for a particular plan

ü  Read the reviews and understand the riders attached to different plans

ü  Online buying cuts down the purchase time and is hassle-free

ü  Most importantly, online buying term insurance helps you make an informed decision 

What are the benefits of buying a term insurance plan online?

Buying a term insurance plan online is convenient and easy; some of the other benefits are:

²  Low premium

The online term insurance plans are available at a lower premium than the offline products. One reason being the absence of a middle man (insurance adviser). The other cost escalation factors, including logistics, paperwork, fixed expenses, are also negligent, and the companies pass on the benefits to the policyholder bringing down the cost. 

²  Easy comparison among different companies plans

Before buying a term insurance plan, an aspirant can do research and compare various companies' insurance plans. Compare the features, benefits, read customer reviews, do premium calculations, etc. Thus buying a term insurance plan is based on the information you gather online. 

²  Quick and secure process

Buying a term insurance plan online is easy and completely secure. You can use net banking, credit, or debit cards to buy the policy hassle-free and instantly receive a receipt. 

Conclusion

Our lives are unpredictable, and no one can rule out any negative untoward incident in life. Hence it is advisable to be prepared to meet such an eventuality and protect your family. Loss of bread bearer is not only a physical loss for the family but can also push them financially backward. With a term insurance plan, an insurer can be assured that the family members will lead a dignified life even in his absence.

5 advantages of investing in long-term equity funds

 

Should you invest in a long-term equity fund in India? Investing in mutual funds for the long term usually means more than 3-5 years at least. In an ideal scenario, investing for more than 3, 5, 7 or 10 years will qualify as a long-term investment bet in order to enable long term wealth creation as well. You may be wondering why an investment should be long term in order to garner wealth. The basic philosophy behind the premise is that any deployment of capital for the long haul will naturally enable greater appreciation in terms of its overall value and this will ensure a handsome return on your investment as well.

Also, the short-term nature of the stock market is fluctuating and volatile, making it more difficult to reap the best rewards on your investment in a shorter period. Staying invested for a longer duration automatically ensures that you ride out the volatility in the market in the short term and get the benefits of better compounding on your investments at the same time.

Biggest advantages of investing in long-term equity funds

As you may already know, there are aspects to be factored in while investing in equity funds including market volatility, higher risk components and long term capital gains taxes among others. However, equity is a vital part of financial planning and you can also consider investing in long-term tax saving mutual funds with pre-defined lock-in periods (ELSS) for getting the highest rewards on your investment.

Here are the 5 biggest advantages of investing in a long-term equity fund in India.

• Duration- The time period for which you invest is really important to say the least. The longer you stay invested, the higher your chances of getting the best returns from your investment. From achieving any specific goal in life or accomplishing major financial objectives, you will have to clearly choose an investment tenure that is proportional towards the goals that you have. It takes time for any fund or stock to hit its peak levels and this is approximately 5-7 years at a minimum. You should give proper time for the mutual fund to grow in value as a long term investment.
• Compounding- This aspect cannot be emphasized upon less! The power of compounding is what actually makes long-term equity investments so lucrative. For equity mutual funds, compounding of the returns makes your corpus swell to a sizable amount at the time of maturity. Most people are often pleasantly surprised to see the overall returns on investment owing to compounding over several years.
• Portfolio Diversification- Diversifying your investment basket will naturally fetch you the highest profits. Investing in a long-term equity fund in India will ensure that you diversify your portfolio and get a chance to beat inflation with good returns.
• Lower Risk- By investing for the longer haul, you automatically spread out your risks and combat short-term market volatility. As a result, your investments go down in terms of the overall risk quotient.
• Proper Regulation- SEBI (Securities and Exchange Board of India) and AMFI (Association of Mutual Funds in India) hold responsibility for regulation of all mutual fund products. Both these government authorities ensure fully transparent investment practices and procedures. They regulate funds that are required to reveal their month-end figures and portfolios online for customers along with their daily net asset value (NAV) and expense ratios as well. Long-term equity funds are well regulated and hence you can be free from worries pertaining to your investment in the long run.

These are some of the biggest advantages of long-term equity fund investments that you should definitely check out.

Why investing in a global equity opportunities fund is a good idea

 

Indian investors are waking up to the sheer potential of international mutual funds in recent times. Several investment advisors and managers of funds are gung-ho about these global funds while private wealth consultants/managers are also recommending various products to their wide spectrum of clients. Geographical diversification is becoming really essential for portfolios of investors in India. Are these funds suitable for Indian investors who individually invest smaller amounts on a regular basis through SIPs? The answer is yes, provided financial goals and risk appetite are in sync.

The best international mutual funds give investors in India a chance to diversify their portfolio and give it exposure to stocks abroad. These are international equity funds spanning countries like the USA, China, Europe, Brazil and other emerging worldwide markets while there are schemes focusing on specific sectors including mining, agriculture, information technology and so on. Some of these fund plans have passive strategies for investments similar to index investments. There are several reasons behind the soaring popularity of global mutual funds including the considerable stimulus package declared by the USA Government which has got people in India eyeing opportunities for diversifying their portfolio in the American market. Additionally, several investment advisors believe that leading USA companies including Amazon, Facebook, Alphabet (Google parent) and Netflix, among others, may uniquely lead global disruptions in a post-COVID-19 scenario. There are similar factors prompting investments in other nations as well.

Global equity opportunities fund India- Should you invest?

Amongst the international equity funds India which are popular with investors, the global equity opportunities fund in India is an emerging favorite. Schemes like these have performed exceedingly well over the last 3 years or so, if such a duration is taken into account and those who had invested approximately Rs. 1 lakh three years earlier in these funds would have seen their corpus swell to a whopping Rs. 2.15 lakh today! This is a specific fund which majorly deploys investments in buying foreign company shares. If you invest for at least 5 years or higher, you can expect handsome returns that will comfortably surpass returns from fixed income instruments and inflation alike.

However, market fluctuations may lead to fluctuations in investment value down the line as well. Global equity opportunities funds are suitable for investing a portion of your capital for diversifying your portfolio. This means that if there is a correction in the Indian market, you can at least safeguard a part of your portfolio from the same. However, you should invest in a fund which invests in companies of varying sectors, sizes and nations. Have an investment horizon of at least 5 years without wanting to redeem your money before this duration.

Taxation on global equity opportunities fund India

When it comes to a global equity opportunities fund, you should remember that capital gains will incur 20% taxation if you sell mutual funds post 3 years from the investment date. If sold before 3 years, they will be taxed at the prevailing slab after adding your income to the amount. Taxes do not have to be paid if you are holding onto these units. Dividends will be added to your income and undergo taxation based on your tax slab.

If your income from dividends crosses Rs. 5,000 in a particular financial year, then TDS will be deducted by the mutual fund house at the rate of 10%. A global equity opportunities fund could be a great way to diversify your portfolio and spread out your risks while enhancing the overall quality of your portfolio. 

ELSS investments- A brief guide

ELSS stands for equity linked savings scheme and it is one of the foremost investment options under which you can save taxes under Section 80C of the Income Tax Act. If you are wondering how to invest in ELSS, you should know that these schemes are quite similar to other open-ended funds in the equity space although they have lock-in periods of 3 years. However, the minimum amount for investment can be as low as Rs. 500 every month without any upper threshold or limit for investing. You can either invest via a lump sum amount or choose SIPs (systematic investment plans).

Keep in mind that each and every installment you make accordingly will have a lock-in period of 3 years. Along with long-term wealth generation, you can garner attractive returns that may surpass inflation as well. Investing through SIPs will help you benefit from rupee cost averaging along with compounding, enabling better protection against market volatility and long-term capital appreciation. Choose ELSS funds on the basis of several parameters like consistent performance in the long term, rate of returns (adjusted for risks), reputation of the mutual fund house/firm and the terms and conditions.

Why ELSS funds are beneficial for your portfolio

Now that you know what is ELSS and know more about investing in these schemes, there are various benefits in store.

·        Lower Lock-In Period- ELSS investments come with 3-year lock-in periods which are considerably lower in comparison to other tax-saving investments like tax-saver FDs which have 5-year lock-in periods, PPF which has a 15-year lock-in period and NSC which has a lock-in period of 6 years.

·        Tax Savings- ELSS tax saving mutual funds will help you save considerably on your tax outgo. Investments are eligible for deductions up to Rs. 1,50,000 under Section 80C. Tax efficiency makes these schemes great options for investments.

·        Building Wealth- ELSS schemes will help you get inflation-beating returns over the long haul, helping you amass wealth considerably over a span of 3-5 years or more.

·        Professional Management- Unlike many other investment options, ELSS schemes will be managed professionally by market experts. They will naturally aim at ensuring the highest possible gains/returns for their clients.

·        Flexible SIPs- For paying smaller amounts every month instead of a lump sum amount and benefiting from cost averaging and compounding alike, you can choose SIPs (systematic investment plans) for amounts as low as Rs. 500 a month.

Of course, you should take a closer look at the market performance of the ELSS scheme that you have chosen along with its returns (adjusted for risk) over a sustained time period. Make sure that you shortlist a reputed mutual fund house as well. These schemes will help you earn good returns while helping you save on taxes as well.

You can flexibly continue with the investment after 3 years or withdraw your money as per your convenience or needs. These are some of the reasons why you should choose to invest in ELSS plans.

 

Do hybrid mutual funds actually balance out your portfolio?

Thinking of investing in hybrid mutual funds? Making a choice between debt and equity is always tough and advisors usually advocate investment planning on the basis of the conditions in the market and age among other factors. If you are an investor who does not want to undergo the sheer hassles of making investments in a multifarious product basket which has to go through rebalancing periodically, hybrid funds are your best option.

Deploying investments in hybrid mutual funds India will help you tap into the potential of both debt and equity as per experts. Equity based hybrid funds will have exposure exceeding 65% for equity and the remainder will be allocated for debt. Similarly, debt based hybrid funds will have around 70-75% allocated for debt instruments and the remainder will be deployed across equity. Owing to their unique nature, hybrid funds are also referred to as balanced funds at times.

Vital things worth noting about hybrid mutual funds

Hybrid mutual funds usually come in the form of asset allocation based funds, funds for capital protection and also MIPs or monthly income plans. They offer the best of both debt and equity investments while lowering risks automatically through diversification. Returns have been steady from such funds over the last few years as per reports. They have ensured close to 18% in returns over the last 3-4 years in comparison to 23% of returns enabled by the BSE (Bombay Stock Exchange) Sensex.

There are some hybrid funds which have generated returns to the tune of even 25% or more annually. Over the last 5 years, these funds have performed substantially better than the Sensex by offering 10% or more returns in comparison to a rise of 5% for the benchmark index. These funds usually perform better whenever markets are witnessing difficulties since debt works like a cushion. This makes them better suited towards withstanding any sudden drops/falls in markets. At the same time, when markets rise rapidly, they may not perform as strongly as peers which have 100% equity components.

Rebalancing on the basis of circumstances in these markets also work magnificently for such funds. Balanced funds which function on a 70-30 ratio basis for exposure for equity and debt respectively, work well in this case. Suppose there is a fall in the stock market. The exposure to equity will fall and fund managers will have to purchase more shares for keeping the 70% threshold intact. Debt in this case, offers the safety net. When the market rises and allocation to equity goes up to 80%, managers will be selling 10% of their portfolio in equities and purchasing debt for making higher profits. The debt aspect is managed in a manner that offers less volatility for the investment while lowering overall risks at the same time.

Remember that the chief objective of investing in hybrid funds is diversification which is possible if both asset classes have negative/low correlation. Choose on the basis of your strategy for allocating assets. Equity based funds will be taxed similarly as regular equity funds. i.e. STCG (short term capital gains) taxes will be taxable at 15% and LTCG (long term capital gains) taxes will be nil.