{"id":4416,"date":"2021-09-07T16:50:32","date_gmt":"2021-09-07T11:20:32","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=4416"},"modified":"2022-05-24T15:27:16","modified_gmt":"2022-05-24T09:57:16","slug":"6-factors-investing-in-equity-funds","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/","title":{"rendered":"6 Factors To Consider When Investing in Equity Funds"},"content":{"rendered":"\n<p>After all the unpleasant news about the Indian economy during the COVID-19 pandemic, the <a href=\"https:\/\/www.tickertape.in\/stocks\/bse-BSEL?utm_source=blog&amp;utm_medium=article\">BSE<\/a> <a href=\"https:\/\/www.tickertape.in\/blog\/sensex-companies\/\">Sensex<\/a> made a positive rebound \u2013 hitting the mark of 50,000 for the first time in Jan 2021. Over the last decade, <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-shares\/\">stock market<\/a> investors who are wary of investing in stocks directly have instead opted for <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> funds. Thanks to this, the <a href=\"https:\/\/www.amfiindia.com\/indian-mutual\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">average AUM<\/a> of India\u2019s mutual fund industry has grown from a modest Rs 5.92 tn in FY 2010-2011 to over Rs 31 tn in FY 2020-2021.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#What-is-an-equity-fund\" title=\"What is an equity fund?\">What is an equity fund?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#Things-to-consider-when-investing-in-equity-funds\" title=\"Things to consider when investing in equity funds\">Things to consider when investing in equity funds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#What-is-the-goal-of-your-investment\" title=\"What is the goal of your investment?\">What is the goal of your investment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#What-is-your-investment-horizon\" title=\"What is your investment horizon?\">What is your investment horizon?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#When-is-the-right-time-to-invest\" title=\"When is the right time to invest?\">When is the right time to invest?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#What-is-your-appetite-for-risk\" title=\"What is your appetite for risk?\">What is your appetite for risk?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#How-is-the-fund-performance\" title=\"How is the fund performance?\">How is the fund performance?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/6-factors-investing-in-equity-funds\/#Which-is-preferable-%E2%80%93-growth-or-dividend\" title=\"Which is preferable \u2013 growth or dividend?\">Which is preferable \u2013 growth or dividend?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"What\"><span class=\"ez-toc-section\" id=\"What-is-an-equity-fund\"><\/span><strong>What is an equity fund?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An equity fund is a <a href=\"https:\/\/blog.tickertape.in\/types-of-mutual-funds-a-quick-overview\/?utm_source=blog&amp;utm_medium=article\" rel=\"nofollow noopener\" target=\"_blank\">type of mutual fund<\/a> that invests its capital directly into company stocks or equity-related instruments.<\/p>\n\n\n\n<p>Investing in equities through an equity fund means higher risk and <a href=\"https:\/\/www.tickertape.in\/blog\/volatility\/\">volatility<\/a> and provides higher returns over a long period. This is because equity fund managers <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> their money into the best-performing stocks in the stock market. To help you earn good returns, they research and choose stocks with the most growth prospects.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Parameters\"><span class=\"ez-toc-section\" id=\"Things-to-consider-when-investing-in-equity-funds\"><\/span><strong>Things to consider when investing in equity funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>With so many <a href=\"https:\/\/www.tickertape.in\/blog\/difference-between-debt-and-equity\/?utm_source=blog&amp;utm_medium=article\">equity<strong> <\/strong>mutual funds<\/a> to choose from, how do you decide which one is the right pick for you? Here are six factors that should help you make the right decision.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"Goal\"><span class=\"ez-toc-section\" id=\"What-is-the-goal-of-your-investment\"><\/span><strong>What is the goal of your investment?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The first thing to consider is the goal of your investment into equity funds. This can range from planning for your wedding expenses, child\u2019s education, home purchase, or even your retirement. Your investment goal will help you decide how much to invest (capital) and also the investment duration. For instance, if you are looking to save tax and earn decent returns, then the Equity Linked Savings Scheme or ELSS is one option to look at to invest.<\/p>\n\n\n<span class='bctt-click-to-tweet'><span class='bctt-ctt-text'><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2F6-factors-investing-in-equity-funds%2F&#038;text=ELSS%2C%20a%20type%20of%20mutual%20funds%2C%20helps%20you%20save%20tax%20and%20earn%20decent%20returns&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" rel=\"noopener noreferrer\">ELSS, a type of mutual funds, helps you save tax and earn decent returns <\/a><\/span><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2F6-factors-investing-in-equity-funds%2F&#038;text=ELSS%2C%20a%20type%20of%20mutual%20funds%2C%20helps%20you%20save%20tax%20and%20earn%20decent%20returns&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" class=\"bctt-ctt-btn\" rel=\"noopener noreferrer\">Click To Tweet<\/a><\/span>\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-is-your-investment-horizon\"><\/span><strong>What is your investment horizon?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Equity funds provide the best returns for long-term investments of more than five years. This is because equity funds are more volatile in a shorter period. For instance, the 1-yr rolling return of any equity fund \u2013 based on past performance \u2013 would be more volatile than the 10-yr rolling return for the same fund.<\/p>\n\n\n\n<p>If you are looking for short-term investments, i.e. less than five years, <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-debt-funds\/?utm_source=blog&amp;utm_medium=article\">debt funds<\/a> are a better alternative to equity funds.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When-is-the-right-time-to-invest\"><\/span><strong>When is the right time to invest?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Should you invest in equity funds when the market is at a high or low? The reality is that the best time to invest in equity funds is today. In other words, there is no right or wrong time to start investing. The earlier, the better.<\/p>\n\n\n\n<p>As equity funds are long-term investments, timing the market is a needless exercise \u2013 as they are designed to overcome <a href=\"https:\/\/www.tickertape.in\/blog\/strategies-to-tackle-volatility\/\">market volatility<\/a> and provide good returns in the long run.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-is-your-appetite-for-risk\"><\/span><strong>What is your appetite for risk?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Your appetite for investment risk can determine the type of equity funds that you invest in. For example, if you want to play safe, it is best to invest in large-cap funds \u2013 or stocks of companies with high <a href=\"https:\/\/blog.tickertape.in\/market-capitalisation-meaning\/?utm_source=blog&amp;utm_medium=article\" rel=\"nofollow noopener\" target=\"_blank\">market capitalization<\/a>. On the other hand, small-cap funds have higher volatility than large and medium-cap funds, hence have the highest risk factor among the three.<\/p>\n\n\n\n<p>Additionally, your age can also determine your risk appetite. The younger you are, the more risk you can take as you have a longer working life to invest your money.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How-is-the-fund-performance\"><\/span><strong>How is the fund performance?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Past performance of your equity fund can be another critical factor for choosing the right one. For starters, check the overall rating of the mutual fund and the track record of the <a href=\"https:\/\/www.tickertape.in\/blog\/investment-company\/\">investment company<\/a> that is offering the fund. Depending on your investment period, check the 3-year, 5-year, or 10-year returns of the fund (in %) and if it has given consistent returns to its investors.<\/p>\n\n\n<span class='bctt-click-to-tweet'><span class='bctt-ctt-text'><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2F6-factors-investing-in-equity-funds%2F&#038;text=Although%20past%20performance%20is%20a%20critical%20factor%20to%20assess%20a%20Mutual%20Fund%2C%20it%20is%20no%20guarantee%20that%20the%20fund%20will%20continue%20to%20give%20good%20returns%20in%20the%20future&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" rel=\"noopener noreferrer\">Although past performance is a critical factor to assess a Mutual Fund, it is no guarantee that the fund will continue to give good returns in the future <\/a><\/span><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2F6-factors-investing-in-equity-funds%2F&#038;text=Although%20past%20performance%20is%20a%20critical%20factor%20to%20assess%20a%20Mutual%20Fund%2C%20it%20is%20no%20guarantee%20that%20the%20fund%20will%20continue%20to%20give%20good%20returns%20in%20the%20future&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" class=\"bctt-ctt-btn\" rel=\"noopener noreferrer\">Click To Tweet<\/a><\/span>\n\n\n<p>However, past performance is no guarantee that the fund will continue to give good returns in the future.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Variant\"><span class=\"ez-toc-section\" id=\"Which-is-preferable-%E2%80%93-growth-or-dividend\"><\/span><strong>Which is preferable \u2013 growth or dividend?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Growth-focused equity funds do not pay out any bonuses or dividends at regular intervals. As an investor, you can only earn your returns by selling out all (or a few) purchased units whenever you need them.<\/p>\n\n\n\n<p>Dividend-paying equity funds pay out dividends \u2013 based on the number of purchased units and the prevailing fund price \u2013 at regular intervals. Some funds also allow you to reinvest your earned <a href=\"https:\/\/www.tickertape.in\/blog\/cash-dividend-vs-stock-dividend\/\">dividend<\/a> into your fund.<\/p>\n\n\n\n<p>In summary, equity funds offer a much safer mode of investing instead of purchasing company stocks directly. The six factors listed in this article can help you earn good returns from equity stocks.<\/p>\n\n\n\n<p>Tickertape offers the best investment tools to simplify your investment decisions. Explore <a href=\"https:\/\/www.tickertape.in\/mutualfunds\/axis-midcap-fund-M_AXMI?utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\">Tickertape&#8217;s Mutual Funds Pages<\/a><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/axis-midcap-fund-M_AXMI?utm_source=blog&amp;utm_medium=article\"> <\/a>to evaluate your favourite scheme.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>An equity fund invests its capital directly into company stocks or equity-related instruments.<\/p>\n","protected":false},"author":27,"featured_media":4431,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8,1750],"tags":[273,468,78],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/09\/Equity-fund-2.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/4416"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=4416"}],"version-history":[{"count":8,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/4416\/revisions"}],"predecessor-version":[{"id":8689,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/4416\/revisions\/8689"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/4431"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=4416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=4416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=4416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}