Equity funds are a type of mutual fund that invests in the shares of various companies trading on the stock market. The companies are selected based on the investment objective of the equity fund scheme. These schemes aim for high capital appreciation for long term wealth creation and take proportional risks to achieve their goal.
Equity funds are a good investment for investors who have a clear understanding of their risk profile and are interested in long term capital appreciation.
The best type of equity fund can vary according to your need, the risk you are willing to take, and your investment horizon. To save on tax, opt for ELSS which has a 3-year lock-in period. If you don't want the lock-in and tax saving option but instead prioritize liquidity, large-cap funds or flexi-cap funds will be the right fit for you.
If you decide to withdraw money within 1 year of making an equity investment, then you will be eligble for short term capital gains tax which is 15% plus cess surcharge. If you withdraw your units of equity mutual funds within 12 months of investing then long-term capital gains at 10% plus cess surcharge.
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