Every other investor who has been investing for quite a while now has transitioned over from debt and hybrid funds to pure equity mutual funds. These types of funds mainly invest in stocks or shares of companies across various sectors. The main objective of equity mutual funds is to generate aggressive returns over a long period of time. In comparison to debt funds, these funds have an extended time frame, they offer more capital appreciation.
Equity funds are categorized into a myriad of types based on market capitalization, diversification, and sectors. These types of funds have two options for investors – dividend and growth. It’s important to understand the difference between the two so that you can pick and choose the right options for yourself.
A dividend mutual fund primarily invests in companies that share profits with stockholders, in the form of dividends. These profits are made by selling stocks at a higher price than what they were purchased for.
A growth mutual fund invests in companies that are going through a transformational lifecycle with the potential for dramatic growth in the future.
Now that you know the difference between dividend and growth options in equity mutual funds, let’s cover the top 10 equity funds in India to invest in 2022.
|Fund Name||Risk Factor||1 Year Returns (%)||Fund Size (in crores)|
|Quant Infrastructure Fund||Very high||65.7||INR 402|
|BOI AXA Small Cap Fund||Very high||42.6||INR 232|
|Quant Tax Plan Fund||Very high||46.3||INR 789|
|PGIM India Midcap Opportunities Fund||Very high||37||INR 4,363|
|Quant Flexi Cap Fund||Very high||46.2||INR 75|
|Axis Small Cap Fund||Very high||42.9||INR 8,411|
|PGIM India Flexi Cap Fund||Very high||26.8||INR 3,522|
|IIFL Focused Equity Fund||Very high||21.6||INR 2,680|
|BOI AXA Tax Advantage Fund||Very high||21.8||INR 546|
|Invesco India Infrastructure Fund||Very high||31||INR 450|
Equity funds offer highly volatile returns when compared to other mutual fund investment options and are suitable to hold long term to escape market fluctuations. Investors who have a high-risk appetite and wish to generate wealth in the long haul can choose to invest in equity mutual funds. People having an investment horizon of 5 or more years willing to invest in high-risk stocks can benefit from equity mutual funds.
Also Read: What Are Gilt Mutual Funds?
The first and foremost thing an investor needs to analyze before even beginning to invest is the investment goals suited for them – the investment horizon and risk factor. These goals vary from investor to investor, owing to the difference in their financial objectives and monetary plans. With that being said, equity mutual funds are for people who are willing to take high risks to gain very high rewards. Choosing the right type of equity fund based on market capitalization, diversification, and sectors, can yield significant capital gains.
Since equity mutual funds invest in stocks, this implies that the performance of these funds are volatile and heavily impacted by market conditions. While these funds generate huge returns in bull markets, they can suffer significant losses in the bear markets. Going for the long haul and holding onto your investment can help beat this volatility.
History Of Fund Performance
The history of fund performances always aids the investors in choosing the right funds and investing wisely. Analyzing the performances gives an idea of whether the funds were able to live up to the objectives and helps in gauging how it will perform in the future. Comparing the chosen fund performance to other similar funds from different fund houses will also help give you better clarity.
Fund houses impose a fee on investors to handle the administrative expenses, called the expense ratio. This is usually a small percentage of a scheme’s total assets and varies from one fund to another, but it’s important to analyze before investing when it comes to equity mutual funds. While the ratio may seem small, it might be huge in absolute monetary terms.
When it comes to taxation, equity mutual funds have a dedicated tax structure:
The capital gains earned on exit within 1 year are treated as Short Term Capital Gains (STCG) and are taxed at 15 per cent.
If an investor holds investments for more than a year, the gains are classified as Long Term Capital Gains (LTCG) and are free if the profits fall under ₹ 1 Lakh, but taxed at 10 per cent if the gains exceed ₹ 1 Lakh.
10 percent TDS (Tax Deducted at Source) is deducted on dividends exceeding INR 5000 earned.
Investments made in Equity-linked savings schemes are exempt from taxes up to INR 1.5 Lakhs on a lock-in period of 3 years.
Also Read: 10 Best Medium Duration Debt Funds
Ease And Diversification
Equity funds are perfect for investors with some experience as beginners might feel overwhelmed. These types of funds eliminate the need to invest in different funds as they invest in various asset classes and sectors. With the perfect amount of diversification, these ensure that the losses if any are not too hard on investors.
Equity mutual funds when held long term navigates through the fluctuating markets with ease. Due to the stocks being from various asset classes and sectors, diversification is high and helps with volatility. Having an investment horizon of 5 or more years will guarantee significant returns for long term wealth generation.
Now that you know everything about equity mutual funds and have a listicle of the top 10 best-performing funds in the market for 2022, you can invest with confidence. It’s highly important to not give in to emotions when it comes to equity fund investing as it can be misleading. Bear in mind that mutual funds are subject to market risks and make sure to read all scheme related documents carefully.
With Navi, investing becomes super easy and hassle-free. You can choose to invest in Navi Mutual Funds through platforms like Paytm Money, Zerodha, and Groww to name a few. In addition to mutual funds, Navi also offers personal loans, home loans, and quick loans to aid in your money-crunch moments.
Before you go…
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully before investing.