An equity fund makes investments in stocks or equivalent securities. Each stock represents a share in the company. They are mostly utilised to purchase a portfolio of stocks. Through the purchase of these stocks, one can receive an indirect ownership of a large bunch of securities. These funds are especially convenient for those who wish to do business without setting up their company, by investing through local companies. The objective of these funds is long-term growth. These funds may also aim at the size of the company before making an investment. Take a look at some of the advantages associated with equity funds:
Diversification: Equity funds can be diversified simply and require a minimal initial investment. Therefore, as an investor, you can purchase different stocks of different companies. The advantage is that is the price of a stock falls, the other stocks can cover up for the loss.
Dividend: If you invest in blue chip companies, you can receive a regular income which comes in the form of dividends. Such companies often pay regular dividends irrespective of good or bad financial times. Since every company has a different cycle, as an investor, you can expect some amount of earning each month.
Capital Appreciation: When a company makes a profit, it chooses to reinvest it in order to expand it through product developments or growing market share. This leads to an increase in the market price of the stock, thereby, ensuring capital appreciation for investors.
Professional Management: None of the investments come with guaranteed success which is professional experts handle mutual funds. Therefore, even if you do not possess knowledge about a certain stock, your fund manager will help you make the right decision related to your investments.
No Brokerage: Most of the fund houses charge a certain fee, brokerage or commission in exchange for their services. In an equity fund, it is possible for an investor to avoid brokerage fees. This is one of the main advantages associated with an equity fund.
Liquidity: As stocks are traded across the world, they are highly liquid in nature. It also means that as an investor you can easily sell your stock when you want. Usually, you can receive your money within a week of the sale of the stock.
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